In The Wellcome Trust Ltd v HMRC [2018] TC06761, the First-Tier Tribunal (FTT) concluded that the charity did not have to account for VAT under the reverse charge as the costs did not relate to an economic business activity.

  • WTL is the sole trustee of the Wellcome Trust, a charitable trust which makes grants for medical research.
  • WTL’s income is largely from investments, though it has comparatively small amounts of sales, catering income, and property rental income which enables it to register for VAT.
  • The investment income is primarily from overseas investments and these are managed by EU and non-EU investment managers.
  • In The Wellcome Trust Ltd v HMCE [1996] (C155/94), the CJEU decided that the purchase and sale of shares and securities by a trustee in the course of managing charitable trust assets was not an economic activity for VAT.
  • This means WTL have not been able to recover any input VAT on costs relating to its non-EU investment portfolio.

HMRC claim the Place of supply of the non-EU investment management services is the UK and WTL is required to operate the Reverse charge on those services:

  • WTL is registered for VAT, is therefore carrying on a business, and is a ‘taxable person’.
  • This means the supply is a ‘B2B’ supply and the place of supply is where the customer belongs.

The FTT considered the place of supply rules under EU law and UK law:

  • The key difference between the wording is that under EU law the requirement is that the taxable person is ‘acting as such’ for the place of supply of services to be where the customer belongs.
  • HMRC contended that ‘taxable person acting as such’ means that supplies for private purposes made to a taxable person would not be subject to the reverse charge but this did not extend to supplies used for non-economic business purposes. The FTT decided this was an illogical conclusion.
  • The FTT concluded the words ‘taxable person acting as such’ effectively means that the place of supply of services to WTL for non-economic business activities does not fall under the B2B rules.

The FTT allowed WTL’s appeal. The services received from non-EU investment managers were services to a non-taxable person for VAT purposes and the place of supply was not where WTL belong.

This meant they were not subject to the reverse charge.


Place of supply: services

Reverse charge: cross-border services

External link The Wellcome Trust Ltd v HMRC [2018] TC06761