Upper Tribunal Tax and Chancery Chamber

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

Fecha: 14-Mar-2025

The FTT’s reasoning on the single vs multiple supply issue

The FTT’s reasoning on the single vs multiple supply issue

53.

As already mentioned, there was no dispute around FTT’s identification of legal principles and its explanation, by reference to the case-law, discussed above and that the case concerned Levob-type supplies. It noted the parties’ agreement that the contractual arrangements should be the starting point going on to mention in relation to the 2006, 2010 and 2015 GMSAs (“the earlier GMSAs”) that:

(1)

The definitions of “Provider”, “Recipient” and “Services” provided that services were provided by one legal entity to another ([272]).

(2)

The “Services” in the earlier GMSAs were “undifferentiated and consist of those requested and provided in accordance with the GMSA and relevant addenda” and that it was common ground that “no distinction [was] drawn between “Support Services” and “Business Delivery Services” ([273]).

(3)

“The relevant addendum, at clause 1 [set out [31] above] provides that the services “will be identified and characterized on invoices”, i.e. the scope of the services is defined by the invoices. It is also clear from, clause 2(b) and 3(b) of the 2006 GMSA and clause 3(b) of the 2010 and 2015 GMSAs that, in respect of all expense products identified in the PPG payment obligations and consideration (referred to as compensation in the GMSAs) are also defined by invoicing” ([274]).

(4)

All versions of the GMSA referred to and incorporated the EAP ([275]).

(5)

Para 6.2 of Appendix B to the EAP made it clear that “any distinct services are to be identified and invoiced separately” ([276]).

(6)

Mr Bradley had confirmed in evidence that CBNA had not prepared separate invoices for Business Delivery Services ([277]).

54.

As regards the 2019 GMSA the FTT noted:

(1)

This “restatement of the GMSA, unlike previous iterations, recognises the distinction that CBNA contends exists between Business Delivery and Support Services” but that “this iteration of the GMSA was brought into effect during the period when CBNA and HMRC were in discussions prior to the issue of the Liability Decision in February 2020 … and it is not disputed that this was one of the reasons behind the restatement of the GMSA in 2019”. The FTT noted that: “In any event there was no alteration in the nature or number of such services supplied or any change in the underlying business” ([280]).

(2)

Under Appendix C there was a contrast between the “essential” Business Delivery Services and the Support Services being a residual category.

(3)

There were three category groupings of Business Delivery (Transaction Execution Services etc.) but that it was acknowledged there was no formal document setting out that the four heads (Technology , Operations, QR and MR) were intended to make up the Business Delivery Services covered by Appendix C.

55.

The FTT then addressed the question of whether the contracts reflected economic reality and CBNA’s argument the contractual documentation had “issues and [could] not provide an exhaustive and definitive analysis for VAT purposes)”. It recorded CBNA’s various points regarding why, in essence, the contracts were not definitive (for instance that they were intra-group, and produced with transfer pricing and regulatory considerations in mind). The FTT agreed however with HMRC explaining (at [288]):

“While it is true that there is a lack of detail in the contracts, I agree with Mr Beal [Mr Beal KC appeared for HMRC before the FTT and before us] that is not, in itself, a reason to conclude that they do not reflect economic reality. The contractual arrangements concerned are those of a large multinational bank, with extensive resources available for the task, in circumstances where the Expense Allocation Policy expressly envisages that the invoicing arrangements deployed under the contractual arrangements will be used for addressing indirect tax consequences of intra-group recharging. There was nothing to prevent the adoption of a much more detailed framework agreement had it been considered appropriate to do. Therefore, on balance, I agree with Mr Beal that the contracts in this case do reflect the true agreement between CBNA and SPLC and, as such, it is not necessary to “go behind” them.

56.

The FTT concluded “taking the contractual documents as a whole” that it was clear CBNA made “a single supply to SPLC of everything that it (SPLC) needs to enable it to achieve its aim of regulatory compliant trading in globalised markets”.

57.

Given the number of detailed specific challenges made to the FTT’s reasoning on the single vs. multiple supplies issue it is convenient to set that reasoning out in full:

“289….. Under the 2006, 2010 and 2015 CMSAs, CBNA provided undifferentiated Support Services. Although the 2019 GMSA did refer, for the first time, to Business Delivery Services and Support Services this was in the context of ongoing discussions with HMRC and did not result in change in the nature or number of such services supplied or alteration to the underlying business. As such, there was no change to the services provided before and after 30 September 2019 when the 2019 GMSA came into effect.
290.
In addition there is nothing in the contractual documents to suggest that the services are not closely linked or that the focus should be on internal divisions within the business as the contractual analysis reflects the VAT classification of examining which legal entity has made what supplies to which legal entity for consideration. As a matter of economic reality it is not possible for SPLC to trade using the Business Delivery Service and not the Support Services (legal, accountancy, compliance, email etc) and vice versa.
291.
The different elements of the supply provided by CBNA to SPLC are “closely linked” (see Gloucestershire Hospitals at [116(i)]). While the “Business Delivery Services” are necessary for SPLC to carry out trades and all operations in the business areas selected, they are not sufficient on their own. The “Supply Services” include essential functions which are necessary for SPLC to be able to undertake its business. Mr Bradley, Mr Richardson, Mr Morawitz and Mr Reig Mascarell [witnesses who appeared on behalf of CBNA ] all accepted that generic services, such as legal and payroll, which CBNA described as Support Services are essential for SPLC to function (see paragraph 67, above).
292.
Further examples of that close link between the elements of the supply can be seen, as described above (in paragraphs 70-81), in the integral part played by the MRGR, the VCG, Product Control, Regulatory & Compliance and CIB Finance & Business Management functions in the business of JPMC to the extent that the different elements form a “single, indivisible economic supply” (see Gloucestershire Hospitals at [116(ii)]). The economic purpose of the services provided by CBNA under the GMSA is to allow SPLC (and other JPMC affiliates in other jurisdictions) to carry on business in a consistent fashion in compliance with the various regulations in the globalised environment in which they operate.
293.
Any attempt to split these different elements into separate supplies would, in my judgment, be artificial (see Gloucestershire Hospitals at [116(iii)]). In evidence, Mr Bradley acknowledged that, for JPMC, there is no choice to be made between making money and complying with regulatory obligations (see paragraph 16, above). He also accepted, as did Mr Bradley, Mr Richardson, Mr Morawitz and Mr Reig Mascarell that CBNA needs what it describes as Support Services to function (see paragraph 67, above). Quite clearly, the different elements of that supply are not available separately (see Gloucestershire Hospitals at [117(2)]). It is not, as Mr Bradley accepted in evidence, possible for SPLC (or any other affiliate) or any of SPLC’s trading areas to decline any service provided by CBNA as it would undermine the aim of standardisation across the JPMorgan group if it did (see paragraph 18, above).
294.
Also, viewed objectively, the “typical consumer” in SPLC’s position would reasonably regard the different elements as a single supply (see Gloucestershire Hospitals at [116(iv)]). This is reflected in the recognition by CBNA’s witnesses that not only the “Business Delivery Services” but also the “Supply Services” are essential for SPLC to carry on its business (see paragraph 67, above).
295.
As such, it must follow that as the different elements of the supply are indivisible and indispensable in order to achieve the aim of the supply (Gloucestershire Hospitals at [117(1) & (3)]), CBNA makes a single supply to SPLC of what Mr Beal described as “Support Function Services” which encompasses and includes both Support Services and Business Delivery Services.”

58.

Thus, contrary to CBNA’s position set out above, the FTT concluded that CBNA made a single composite supply of ‘Support Function Services’ to SPLC.