In JPMorgan Chase Bank NA v HMRC  TC8957, the First Tier Tribunal (FTT) found that support and business services supplies were one single supply not qualifying as exempt from VAT. The intra-group supply exemption was disapplied due to elements coming from overseas, meaning all elements had to be standard-rated.
- JPMorgan Chase Bank NA (CBNA) and JPMorgan Securities Plc (SPLC) were part of the same global corporate group and same UK VAT group, due to CBNA having a UK branch.
- CBNA supplied 'support services' and 'business delivery services' to SPLC. Support services were more administrative in nature, including legal, HR, compliance and finance. Business delivery services provided a trading infrastructure, including technology, operations and market risk, without which SPLC could not trade.
- These services would ordinarily be disregarded between UK VAT group companies.
- The provision of the services was dealt with under a master services agreement and billed in a lump sum using the group billing software. It was not possible to identify exempt and non-exempt services or even individual services as part of the agreement. CBNA provided all of these services to group affiliates.
- It was confirmed that SPLC would not have been able to decline any of the services, as they ensured standardisation across the global group.
- In order to supply some of the services, CBNA bought overseas services in order to make supplies to SPLC.
- HMRC argued that this disapplied the intra-group exemption, as per s.43 (2A) and (2B) VATA 1994.
- CBNA accepted that the support services were subject to VAT.
- As part of ongoing wider enquiries into the JPMorgan business, HMRC raised protective assessments which included disapplying the intra-group exemption, treating all services as a Single supply and subject to standard-rated VAT.
- CBNA appealed to the FTT.
The FTT found that:
- The services agreement did reflect economic reality at the time.
- All of the services were required by SPLC in order for it to trade, so no distinction could be drawn between the support services and the business delivery services.
- All elements of the supply were closely linked and not available separately.
- This and the wording of the agreement indicated one single supply of all the services provided.
- Despite the test in Gray & Farrar International LLP v HMRC  EWCA Civ 121, it was not possible to identify a principal element of the supply, all elements were equally necessary. As such, the supply as a whole had to be standard-rated.
The FTT decided that there was one single supply of services that was not to be disregarded as an intra-group supply and was not exempt as a supply of financial services. The appeal was dismissed.
Useful guides on this topic
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A beginner's guide to VAT
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