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

The FTT was also shown actual invoices. By way of context for those it is necessary to explain the “Inter-entity invoicing tool” (“IETI”) that was used as part of the invoicing process as part of JPMorgan’s efforts to identify and classify intra-group services for VAT purposes under the 2006 GMSA. In brief this was described as a “bolt on” to the invoicing process in the form of a piece of software that would enable the VAT team to be able to quantify the VAT treatment of the items covered by each invoice. There were 22 descriptions such as “Clearing and Settlement of trades” “M&A Corporate Finance intermediary services” and “Technology or business support services”.

The more detailed background to this tool was as follows. The FTT heard that the SAPCO system JPMorgan had used for invoicing lacked specificity, merely recording generic inter-company fees. To address this, JPMorgan developed the IETI “bolt-on” to SAPCO to allow the VAT Team to determine the VAT treatment of services by aggregating cost allocations into recognisable functions ([135]–[136]). IETI applied a “principal-ancillary” approach to amalgamate services and assign them one of 22 predefined service descriptions, which were later updated in line with the 2019 GMSA ([137]).

Invoices generated through IETI included layered detail: a summary page listing service descriptions, followed by itemised breakdowns by receiving business area, and finally, extensive documentation of the specific “Expense Products” and their values ([138]–[139]). It was explained that the cost allocation process aimed to ensure each business area paid only for the services it used, stating it was designed “to ensure that all costs are allocated (to the extent practicable) to the relevant business areas that benefit from the services” ([140]). However, IETI did not determine VAT liability; it was a tool to quantify consideration, with classification handled semi-manually by the VAT Team using the service descriptions and guided by Mr Bradley ([141]–[142]).

The classification process aimed to distinguish between exempt and taxable supplies, with exempt services typically linked to Technology, Operations, and Market Risk. The VAT Team used a structured approach, as outlined in a 2017 paper to HMRC, to apply different service descriptions depending on the nature of the supply ([143]–[145]). CBNA’s witness, Mr Bradley (a CBNA employee who headed up the VAT EMEA team) noted the challenge in identifying “any specific supply with exempt characteristics that represents a clear exempt supply,” acknowledging that IETI sometimes misclassified services, particularly by wrongly categorising some costs as taxable Support Services ([147]–[148]). He admitted the invoicing structure was “opaque” and lacked documentation explicitly identifying exempt supplies.

The FTT also heard that IETI’s “bottom-up” methodology—aggregating components into a service—could obscure the nature of the overall supply. Mr Bradley conceded this approach might misrepresent the integrated service, stating, “the integrated service as a whole is often more than, or different from, the sum of its component parts” ([149]).