UT/2024/000002 - [2025] UKUT 00188 (TCC)

The recitals to the 2006 GMSA explained how, in providing services to one another, affiliates were subject to US banking and tax and transfer pricing rules (these were matters which the FTT had recorded had driven the need to ensure inter-company payments were based on expense allocations ([86])). The 2006 GMSA recitals also explained that JPMC had adopted an EAP:

“…which sets out the principles that JPMC and its Affiliates are to follow in determining the component cost by Expense Product (as defined below) to make up the total compensation to be paid for Services such that JPMC and its Affiliates will be in compliance with the Bank Regulatory Rules and the Tax Rules with respect to those Services”

It continued:

“WHEREAS, certain of the Expense Products within the scope of the Expense Allocation Policy are more fully described in the annual Product and Price Guides (as defined below) and any annotations thereto located on JPMC’s internal website in the Finance Workspace (it being understood that the items detailed in the Product and Price Guide may not necessarily be complete Services for purposes of value added tax or other analogous indirect taxes but rather may be viewed as components of Services);

WHEREAS, the Expense Allocation Policy sets out the guidelines necessary to determine the nature of the Expense Products reflected in the Product and Price Guide that can be amalgamated to represent the consolidated price of Services provided for purposes of value added tax or other analogous indirect taxes;”

Clause 1 of the 2006 GMSA provided definitions including at c) that:

“Services” shall mean the activity performed by an affiliate for another the consideration for which is represented by the total cost of Expense Products related to that activity. These Services may be provided by a Provider to a Recipient pursuant to an Addendum.”

Clause 2, headed “Services; Compensation” provided as follows:

“(a)

In General. Each Provider shall, or may, provide Services to a Recipient, from time to time, upon request. The material terms and conditions upon which such Services are provided shall in each instance be as mutually agreed as evidenced in an Addendum to this Master Service Agreement (each, an “Addendum” and, collectively, the “Addenda”), which may, but need not, be appended hereto. This Master Service Agreement and all such Addenda together constitute a single agreement and are referred to collectively as the “Agreement.”

(b)

Support Services. Except as otherwise mutually agreed, or if the relevant amounts are de minimis, for Expense Products within the scope of each annual Product and Price Guide (as the same may be revised and updated from time to time) that are identified singly or collectively as Services for which amounts are to be charged, each Recipient agrees to pay for the Services provided to it by the Provider the amount invoiced by the Provider to the Recipient, provided that the invoiced amount is calculated in accordance with the provisions of the Expense Allocation Policy. (It is understood and agreed that the detail provided on an invoice may encompass components of Services which in and of themselves are not complete services for purposes of value added tax or other analogous indirect taxes.)

…”

Clause 3 which is headed “Accounting, Billing Procedure; Taxes” provided:

“(a)

Each Provider and each Recipient shall each maintain on their general ledgers special intercompany payable and receivable accounts for the exclusive accounting of the Services.

(b)

For Services, the cost of which is determined on the basis of the Expense Products within the scope of the Product and Price Guide, the Provider thereof shall charge the Recipient monthly, or as otherwise agreed between the parties, by preparing an invoice (“Invoice”) addressed to the Recipient in accordance with the terms of this Master Service Agreement and describing on the Invoice (substantially in the form of Appendix A attached hereto, or in some other form to which the parties mutually agree) the Expense Product singly or collectively that forms the basis of the consideration for Services performed and the charges therefore. For all such Services provided pursuant to this Agreement, and any other Services set forth in a Schedule to an Addendum, the Provider shall provide such other details and documentation as may reasonably be requested by the Recipient in order to substantiate and approve the charges.”