In The Wellcome Trust Ltd v HMRC (Case C-459/19) (17 March 2021), the Court of Justice of the European Union (CJEU) held that services supplied to a taxable person who acquired those services exclusively for its non-business activities were nonetheless to be regarded as supplied to a taxable person 'acting as such'. Consequently, it was necessary for the recipient of those services to account for VAT under the reverse charge.

The Wellcome Trust is a charitable organisation that uses the services of investment managers to assist it in managing its large endowment portfolio. The Wellcome Trust sought to reclaim input VAT it has incurred.

HMRC refused the claim. Ultimately, the case was referred to the CJEU.

In 1996 the CJEU ruled that the investment activities of the organisation were not ‘economic’ activities and it should be treated as a private investor with a business activity and hence input VAT could not be reclaimed.

In 2010, the Place Of Supply rules for services rules were amended. From that date, the place of supply of services to a taxable person is the place where the recipient is established and where the recipient is non-taxable the place of supply is where the supplier is established.

  • The Wellcome Trust Ltd undertakes both taxable and non-taxable activities.
  • It makes some minor taxable supplies but its main activity, the management of a charitable trust’s substantial investment portfolio, is regarded for VAT purposes as a non-business activity.
  • The company argued that it did not act as a taxable person when it purchased the fund management services as it was simply an investor, rather than a professional trader and hence the place of supply was considered not to be the UK but where the suppliers were established.
  • As a result, it ought not to be liable for VAT.

The question before the CJEU was whether the company was acting as a taxable person when it purchased the investment management services.

Unfortunately, the CJEU held that services supplied to a taxable person who has both economic and non-economic activities must be regarded as a taxable person in response of all services rendered exclusively for its non-business activities.  

Consequently, the non-EU managers were resupplying services to a taxable person and accordingly those services were liable to account for VAT under the reverse charge.  

Useful guides on this topic

Place of supply: Services
The place of supply (POS) of a service determines whether the supply is within the scope of UK VAT and whether VAT is payable on that supply.

Partial exemption & input VAT
How do you calculate the amount of input tax you can recover under the VAT partial exemption rules? What are the de minimis rules?

External Link

The Wellcome Trust Ltd v HMRC (Case C-459/19) (17 March 2021)

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