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

Given our conclusion that even if there had been multiple supplies the FTT had not erred in its conclusion that those were not exempt we will deal with this issue as briefly as possible too.

In terms of the relevant legal principles there is no dispute that relevant principles summarised in HMRC v Gray & Farrar International LLP [2023] EWCA Civ 121where the Court of Appeal confirmed that “the predominant element test is the primary test and endorsed the following ‘hierarchy’:

“(1)

The Mesto predominance test should be the primary test to be applied in characterising a supply for VAT purposes.

(2)

The principal/ancillary test is an available, though not the primary, test. It is only capable of being applied in cases where it is possible to identify a principal element to which all the other elements are minor or ancillary. In cases where it can apply, it is likely to yield the same result as the predominance test.

(3)

The “overarching” test is not clearly established in the ECJ jurisprudence, but as a consideration the point should at least be taken into account in deciding averments of predominance in relation to individual elements, and may well be a useful test in its own right.”

It is argued the FTT confused the concept of “predominance” with the concept of “principal” when it stated at [302] that: “it is impossible to identify any particular element as principal”.

We reject this argument. It is clear from the preceding paragraphs (setting predominance as the relevant test by reference to Gray & Farrar, Target Group Ltd v HMRC [2018] UKFTT 226 (TC), and Target Group Ltd v HMRC (2019 UKUT 340 (TCC)– all of which referred to predominance) and the subsequent reference in [303] to “in similar circumstances where it not possible to identify a predominant element” that the FTT had in mind the term “predominant”. Although it used the term “principal” that plainly did not mean principal in the sense of principal/ ancillary (which it had earlier recorded as not being the primary test). There was therefore no error in the FTT’s rejection of the ground on the basis of any confusion between the two tests.

Finally we should mention that before the FTT and before us HMRC had raised an issue that the appeal should have been dismissed on the basis of what they described a threshold question of whether CBNA had identified any specific exempt supplies and for what consideration those supplies were given (“the identification issue”). The FTT held against HMRC on the that issue (at [251] to [256]). HMRC’s Response argued the FTT was wrong to do so. Given we have already decided to uphold the FTT’s decision dismissing CBNA’s appeal on the basis there was no error in the FTT holding there was a single taxable supply we do not consider it necessary to address this further argument for why the appeal should be dismissed.