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	United Kingdom VAT & Duties Tribunals Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> American Express Services Europe Ltd v Revenue & Customs [2008] UKVAT V20744 (16 July 2008) URL: http://www.bailii.org/uk/cases/UKVAT/2008/V20744.html Cite as: [2008] UKVAT V20744

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20744

PLACE OF SUPPLY – UK company performing services for US parent – Services relating to real estate – Continuous supplies – Whether composite or separate – Management – Advice – Reporting – Found indivisible on facts – Whether all within Art 9.2(e) of Sixth Directive – No – Not within Art 9.2(a) – No dominant element directly connected to specific property – Under Art 9.1 place of supply UK – Appeal dismissed

LONDON TRIBUNAL CENTRE

AMERICAN EXPRESS SERVICES EUROPE LTD Appellant

and –

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMS Respondents

Tribunal: THEODORE WALLACE (Chairman)

ROY JENNINGS, FCA, FTII

Sitting in public in London on 25 to 29 February and 3 March 2008

Roderick Cordara QC and Emily Wood, instructed by Dorsey and Whitney, for the Appellant

Peter Mantle, instructed by the Solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2008


 


DECISION

1. This appeal concerns the place of supply of services provided by the Appellant to American Express Travel Related Services Company, Inc ("AETRSCo"). The Appellant is established in the UK, AETRSCo is established in the USA.
2. AETRSCo is the parent company of the Appellant's immediate parent, a UK holding company. The Appellant is therefore indirectly a wholly-owned subsidiary of AETRSCo. AETRSCo is in turn a subsidiary of American Express Corporation, the ultimate parent of the multi-national financial services group ("the Group").
3. The appeal is against a decision dated 21 January 2003 that the place of supply of the services to AETRSCo was in the United Kingdom and against an assessment dated 10 June 2003 to £607,749 VAT from 1 May 2000 to 31 December 2002. Since the original decision the Appellant has accounted for VAT under protest subject to the outcome of this appeal. A repayment claim for £1,094,235 up to March 2006 was submitted in May 2006; it is not clear whether a decision has been given. In any event it is not within the present appeal.
4. The original decision was on the footing that the services were directly related to land, that there was a single supply, that it was not possible to locate the correct place of supply based on the location of the properties and that therefore section 7(10) of the VAT Act 1994 applied to make the place of supply the UK.
5. The appeal was on the basis that the services were performed for a customer established outside the EU so that the third indent of Article 9.2(e) of the Sixth Directive applied.
6. By a Statement of Case substituted in 2007 Customs contended that there was a single supply of services to which Article 9.2(e) did not apply with the result that Article 9.1 and s.7(10) of the 1994 Act applied and the place of supply was in the UK.

The Sixth Directive

7. The relevant provisions of Article 9 were as follows,

"1. The place where a service is supplied shall be deemed to be the place where the supplier has established his business or has a fixed establishment from which the service is supplied or, in the absence of such a place of business or fixed establishment, the place where he has his permanent address or usually resides.

However –

(a) the place of supply of services connected with immovable property including the services of estate agents and experts, and of services for preparing and co-ordinating construction works, such as the services of architects and of firms providing on-site supervision, shall be the place where the property is situated;

…

(e) the place where the following services are supplied when performed for customers established outside the Community or for taxable persons established in the community not in the same country as the supplier, shall be the place where the customer has established his business or has a fixed establishment to which the service is supplied or, in the absence of such a place, the place where he has his permanent address or usually resides:

…

- services of consultants, engineers, consultancy bureaux, lawyers, accountants and other similar services, as well as data processing and the supplying of information,

…"

The relevant recital to the Directive was as follows:

"Whereas the determination of the place where taxable transactions are effected has been the subject of conflicts concerning jurisdiction as between member States, in particular as regards supplies of goods for assembly and the supply of services; whereas although the place where a supply of services is effected should in principle be defined as the place where the person supplying the services has his principal place of business, that place should be defined as being in the country of the person to whom the services are supplied, in particular in the case of certain services supplied between taxable persons where the cost of the services is included in the cost of the goods."

That recital is also relevant to Article 8 which applies to supplies of goods.

8. The relevant domestic legislation is contained in section 7(10) of the VAT Act 1994 and Schedule 5 together with the Value Added Tax (Place of Supply of Services) Order 1992 S.1. No.3121. Neither party relied on the domestic provisions. All submissions were based on the Directive.

The Evidence

9. There were two witnesses both of whom confirmed and amplified witness statements and were cross-examined. The evidence was recorded on a transcript. There was a bundle of documents some of which were contemporary. There was little dispute as to the primary facts. Some questions did arise in relation to the witnesses' knowledge of the facts at the material time.
10. Michael Harold Robertson was seconded from AETRSCo to the Appellant from early 2004 until late 2006 as finance director responsible for Global Real Estate for Europe Middle East and Africa ("EMEA") and for Japan Asia Pacific and Australia ("JAPA"). He was not a director of the Appellant, "director" merely being a label for his position in the organisation. At the end of 2006 he moved back to the United States and has been working as director of finance supporting the controllership organisation in Phoenix, Arizona. Before secondment to the Appellant he was director responsible for technology finance working in Phoenix where he was responsible primarily for the database from which financial information was downloaded from the general ledger for analysis. He reported to a lady in AETRSCo who briefed him at the outset for his assignment in the UK. There had been some dissatisfaction with his predecessor; however his predecessor, who had been on secondment from JAPA, was there when Mr Robertson arrived and Mr Robertson spent a lot of time with him in the first couple of weeks. Apart from that Mr Robertson said that he did not have access to real solid evidence as to how the finance team had been operating.
11. Ruth Felsing has worked in the indirect tax team in the United Kingdom since 1974 and for the Appellant since it was incorporated in 1994. She is currently Vice-President, Indirect Tax EMEA. From 2001 her department was immediately adjacent to the real estate team at Burgess Hill, Sussex; previously the real estate team was in the floor above in an office at Brighton. She was concerned with the activities of the real estate team because of the VAT implications. She was involved in the partial exemption special method calculations including the annual adjustment. The monthly charges to AETRSCo from January 2003 were included in the VAT calculations.

The facts

12. The organisational structure of the American Express Group differed in some respects from the legal structure. The Group had two main operating subsidiaries, AETRSCo and American Express Bank Inc; we were told that the bank has just been sold. The business of AETRSCo included the Group's card, travel, merchant and network businesses, as well as the travellers cheque and other prepared products and services. AETRSCo did not itself operate outside the USA. The Appellant carried on the business of AETRSCo in the UK; this was separate from the banking business, described as a private bank, which was carried out by a subsidiary of American Express Bank Inc, in premises shared with the Appellant in London. The Appellant issued the cards in the UK. Other subsidiaries of AETRSCo carried on the business of AETRSCo in the rest of the EMEA and the JAPA region. Leases were normally in the name of the relevant local operating subsidiary.
13. The organisational structure was as follows. AETRSCo, which was based in New York in the same building as the Group headquarters, among its activities oversaw all real estate matters worldwide. AETRSCo received reports and granted approvals where necessary and reported up to senior management of the Group. AETRSCo had a division known as the Global Real Estate Group ("GREG") through which the real estate aspect of its activities was carried out. The responsibilities of GREG were divided into three regions: the Americas, EMEA and JAPA. The functions of GREG in EMEA were carried out by a division of the Appellant company known as the Real Estate Group ("REGUK"). The Appellant received monthly payments from AETRSCo for the services performed by REGUK. These services might relate, for example, to the obtaining of a new lease by the Spanish operating subsidiary of AETRSCo: REGUK would assist and supervise the transaction, where necessary passing it up to GREG for approval in particular of the financing, whereas the Spanish company would become the leaseholder. The appeal concerns the monthly payments to the Appellant for the services performed by REGUK being based on cost plus 10 per cent. Some of the staff working for REGUK, in particular Mr Robertson, were seconded by AETRSCo and his costs were not reflected in the payments to AETRSCo. He was paid in the USA. His predecessor's costs were paid for by an Australian subsidiary.

November 2001 overview

14. On 6 and 7 November 2001 Customs conducted an audit of the Appellant's real estate activities. Three persons were recorded as present for the Appellant at a meeting, including Geoff Moss, a finance manager, and Mary Lemon, of the taxation department; two Customs officers were present. Janet Taylor one of the officers prepared a draft overview of the business which was amended by the Appellant in September 2002. We summarise or reproduce the main relevant parts in paragraphs 15 to 23, this being best contemporary evidence for the period covered by the assessment.
15. REGUK had nine staff employed by the Appellant, four in Relationship and Project Management and five in Finance. Facilities Management was largely outsourced by the Appellant to Johnson Controls.
16. REGUK was recorded as acting "as a buffer between the Amex core business and the property industry." It was said to be an " 'intelligent client' for the agents, brokers, architects and other professionals who execute the strategies" which it produced. Its role was "to extract information from the business units in terms of their forecast needs, advise them of their options and then synthesise that information into a strategy which the relevant external professionals could execute at minimum cost to the Amex."
17. "All actual hands-on relationships with buildings" were handled by people other than REGUK which acted for Head Office. "The mandate of [REGUK] is summarised by the concept 'we give our business customers not what they want but what they need'." REGUK interpreted what the business units said they needed into what property professionals could deliver. REGUK having established a brief, the execution was tasked to an external party.
18. Johnson Controls was responsible for facilities management and financial administration. Each major facility had its own manager/space planner and those were Johnson Controls employees. Johnson Controls processed purchase invoices for each building and the cost of this was included in the facilities management charge to AETRSCo. Johnson Controls also managed sub-leases and issued rent invoices for sub-let properties as agent.
19. Trammel Crow Savills Ltd acted as a contractor under an agreement with the Appellant dated 1 January 2001 managing leasing activity, usually via brokers, and ensuring on-site delivery by other consultants and contractors in line with requirements. They offered support on regional facilities initiatives.
20. Each property was logged on SLIM (Strategic Lease Information Management System) with a unique property identifier. A schedule of 135 UK properties was annexed to Janet Taylor's note. Most properties were acquired on medium term leaseholds. Properties were only acquired for Group use; if property was no longer needed, the preferred option was to terminate, surrender or assign the lease, subletting where this was not feasible.
21. All occupancy related expenses, such as rent, rates, repairs, depreciation, insurance, cleaning and facilities management charges for the Appellant's buildings, were charged to the business unit occupying the building. Space utilisation was monitored by a third party, Space Planning Trends, using a data system known as CAFM which had detailed drawings of all buildings showing who was occupying each area with details of all shared areas. This data was combined with the budgeted costs for each building supplied by REGUK to produce the occupancy charges to each business unit. The cost of space occupied by REGUK and Johnson Controls was allocated to each occupier on a proportionate basis.
22. Capital projects could be business driven, as when a business needed to expand or contract, or could be initiated by REGUK when a building needed refurbishment or replacement. An appropriation request was required for each capital project which had to be authorised at the appropriate level.
23. We reproduce in full the final two paragraphs of Janet Taylor's note headed "Service fee to US",

"A list of the [REGUK] cost centres [was enclosed]. The nine [REGUK] staff are not included in the occupancy chargeouts. They are regarded as providing a regional service to AETRSCo and as such, their costs are charged out, with a 10% uplift to AETRSCo on a monthly basis as part of the corporate cost centre chargeout. The chargeout will be put through as an inter-company transaction. A copy of the chargeout calculation for September 2001 [was enclosed]. [Geoff Moss] explained that the US collates all the occupancy costs from around the world and that those are re-allocated back at a regional level for information. [Mary Lemon] explained that the re-allocation is not a supply, merely an assignment of the cost which is done for senior management reporting purposes.

Throughout the EMEA there are over 200 real estate staff managing over 350 premises. These people have direct responsibility for the daily management of specific premises in their respective countries, including the UK. As part of this, they are responsible for engaging outside contractors for all manner of work ranging from cleaning and general maintenance to major design and alteration works. All the costs of those activities are charged to the local business units occupying their respective premises. Consequently, the VAT treatment of these costs is handled in each country's local VAT return."

24. On 19 December 2001 Janet Taylor wrote that the treatment of the REGUK chargeout to the US was incorrect. The REGUK staff were predominantly engaged in lease negotiation, arranging for routine maintenance, arranging and monitoring capital refurbishment projects, property management and budgeting activities relating to the letting of property, all of which related to specific sites of land and the place of supply was where the land was situated.
25. Following a meeting on 13 May 2002 when Janet Taylor's letter was discussed, Theo Millis, Vice-President Taxation, wrote on 16 July 2002, repeating the last paragraph of the note of the November meeting and stating,

"In the UK, in addition to the above services which are directly related to specific sites, the costs of which are borne directly by the respective business units, we have a handful of people who have a regional responsibility to our head office in New York."

He then referred to the staff mentioned at paragraph 15 above five of whom "belong within the finance function and provide financial services to AETRSCo in New York."

26. The assessments under appeal were based on the charges debited to AETRSCo and credited to the Appellant in the inter-company accounts. Sums were debited monthly. The charges were calculated by reference to the costs of each of a number of cost centres of REGUK marked up by 10 per cent. The largest element was staff salaries and payments for work outsourced, in particular to Trammel Crow.
27. The costs figure for 2001 coincided to within a pound of the figure on which the 2001 VAT assessments were based. The variations between the cost centre schedule and the assessments for 2000 and 2002 were not explained to us. The 2000 costs came from two cost centres (Transaction Management and Finance), those for 2001 came from three costs centres, Facilities Management being added; 2002 costs came from four cost centres, Project Management being added. Costs charged to AETRSCo did not include the cost of staff seconded to the Appellant by AETRSCo and other group companies.
28. There was no written contract between AETRSCo and the Appellant nor was there any correspondence or documents passing between them evidencing the services to be performed.
29. The basic functions performed by REGUK remained stable from 2000 to 2006, however there were some changes, for example lease administration work for the JAPA region was transferred in 2002. No charge was made by reference to Facilities Management or Project Management in 2000 or in respect of Project Management in 2001.
30. Charts and schedules were produced showing staff attributed to each cost centre and the functions which they were performing. These were not entirely consistent no doubt in part because those preparing them, in particular Mr Robertson, were not there all the relevant time. Further, there were changes within the relevant years.
31. The Finance Team, which Mr Robertson headed from 2004 although only seconded to the Appellant, was as with all the teams solely concerned with real estate. It carried out regular budgeting and forecasting exercises, monthly accounting and analysis including cost control for the EMEA region; it maintained a database with lease payment terms and renewal dates; it made payments for leases and suppliers' invoices recharging the business units and provided for financial reserves to cover dilapidations. The team provided any financial information required in relation to real estate operations, much of it ad hoc. A general ledger for the Group was maintained in Phoenix, Arizona, on an Essbase data system, from which the Finance Team were able to extract information for reports and analysis. Other data systems accessed, such as SLIM and CAFM, have already been mentioned. The accounting and reports by the Finance Team were essentially for cost control and forecasting purposes rather than for statutory accounts and audit. The Finance Team provided reports, information and analysis to GREG in New York, to regional and business units and their real estate teams and to the other REGUK teams.
32. The Transaction Management team was mainly concerned with changes in leases, extensions, rent reviews, terminations and new leases. Where structural work or refurbishment was needed this was covered by Project Management. Using information from the SLIM database maintained by the Finance Team, Transaction Management contacted the local business unit and worked with that unit to determine the appropriate response. If the local unit wished to take action, Transaction Management checked its compatibility with the strategic goals of GREG and REGUK and where necessary instructed local brokers to negotiate with the landlord. Once negotiations were concluded, draft heads of agreement were considered by Transaction Management. Approval from the head of Transaction Management was required together with the head of REGUK or, in the case of appropriations of $500,000 or more, from GREG. Each year there were 50 to 100 events. Transaction Management produced a form with substantial information and analysis including the annual costs including depreciation, usable square feet per member of staff and capital costs. Transaction Management was outsourced to Trammel Crow from 2001, see paragraph 19 above.
33. Project Management appears to have been separated from Transaction Management as a cost centre from 2002, Terry Pitt having been in the Transactions Management team for the preceding two years and having been engaged in project activity for some 10 years before that. Project Management was concerned with improving the standard of buildings, including improvements on new leases. The costs of the projects themselves were payable by the relevant business unit, only REGUK's costs, including Trammel Crow's fees and REGUK's residual costs, being charged to AETRSCo. Some of the projects were agreed at the start of a year representing global and regional strategic decisions.
34. Facilities Management was concerned with the delivery of ongoing facility services to the core businesses in accordance with Group global standards, ranging from mail to food services, cleaning and maintenance. The actual work was carried out or organised by local facilities management teams and the costs were borne locally. Facilities Management managed and oversaw the local management, ensuring that local managers complied with standards set by AETRSCo and global group standards. These varied from disability access to continuity of appearance of Group facilities in different countries and standards of cleanliness and decoration. REGUK reported to GREG on the performance of local managers. A database was maintained with detailed information of work to local properties. Facilities Management was responsible for business continuity planning to provide contingency plans in the event of natural disasters or terrorist attacks.
35. In addition to the functions described above of the specific cost centres, strategic leadership or "blue sky thinking" was included in the Facilities Management cost centre from 2001. These costs represented the salaries and other costs attributable to the head of REGUK, John Martin, to Charles Stafford, who was also a Vice-President, relationship leader and strategy, and to Marilyn Willscroft, a long-serving administrator. No charge was made to AETRSCo in respect of their costs in 2000. Mr Robertson's evidence was that these persons were concerned to align the strategic direction of real estate with the requirements of the business units. They were concerned to align the needs and plans of the local units with Group policies inter alia maintaining the brand image of American Express and providing staff with suitable work plans. They were engaged in forward thinking in relation to real estate, analysing what opportunities existed in various locations, analysing the costs of those locations and identifying with business leaders whether certain locations would be suitable. He said that this was the forward thinking part of REGUK.
36. Mr Robertson produced documentation regarding the leasing in 2005 of further space on the 5^th floor of a property in Amsterdam. This was produced as a sample relevant also to the period covered by this appeal. At the request of the manager of the business unit in Holland the finance team carried out a cost benefit analysis to determine whether the proposal was feasible, giving three or four alternatives to the local unit. A proposal involving costs of $1,098,030, of which $330,195 was initial capital expenditure mainly on construction and $767,835 was lease commitment mostly rent, was selected by the local unit. Mr Renform, the local manager, prepared an Appropriation Request for Projects which he signed on 14 September 2005. Four other Benelux or Europe staff gave their approval in September. It was shown as approved electronically by Paul Nellist, a Trammel Crow employee, who headed the Transactions team at REGUK; the Attachment for Appropriation gave the date of his approval as 15 August. Three AETRSCo staff in the USA were shown as giving approval on 19, 21 and 28 September, the last being Michael Roth who was responsible for approving any real estate attachment and associated projects around the world. James Hanford, then head of REGUK, is shown as giving his concurrence or approval on 30 September and signed the Attachment for Appropriation on 17 October 2005. This signature was the last. Mr Robertson's statement covered this under Project Management. In evidence he said that the concurrence of Mr Hanford and Mr Nellist was necessary for the application to be made for the money.

Appellant's Submissions

37. Mr Cordara submitted that the Appellant made multiple supplies naturally falling into five streams: Finance Management, which operated daily; Project Management and Transaction management, both of which were ad hoc; Facilities Management, which was ongoing, and Blue Sky thinking. Each stream was complete with its own internal logic and commercial significance. None of the streams predominated over the others and any could be removed without affecting the quality of the others. The level of outsourcing by the Appellant to Trammel Crow and Johnson Controls was indicative that there were multiple supplies. He accepted that there were continuous supplies of services but said that this was not relevant to whether the supplies were single or multiple.
38. He said that Article 9.2(e) covered a disparate list of services. The words "and other similar services" did not refer to some common feature but to the activities viewed separately, see Van Hoffmann v Finanzamt Triel (Case C-145/96) [1997] ECR I-4857 at [21]. The services supplied had elements of all the Article 9.2(e) activities. Much of the work was that of consultants or consultancy bureaux : consulting can be for pure information, for information and judgment or for judgment alone. The consulting went two ways, upwards to New York and downwards to the third tier. New projects had an engineering aspect in relation to the fabric of buildings. Guidance on rent reviews had elements of services habitually done by lawyers. There was a heavy element of accountancy, as well as data processing and the supply of information. He said that many firms are multi-disciplinary; it could not be right that the alignment of two disciplines, such as lawyers and accountants, had the effect that supplies, which would have been within Article 9.2(e) if separate, were not covered because they were combined. He submitted that Article 9.2(e) was a single gateway with a number of component elements. Although a consultant has an element of expertise, this may be acquired with no paper qualification. There is no qualitative distinction between what a consultancy bureau does and what a consultant does. Data processing and supplying information obviously overlap other activities.
39. Mr Cordara said that in Linthorst v Inspecteur der Belastingdienst (Case C-167/95) [1997] STC 1287 there was a strong hint in the Advocate General's opinion that the essence of a consultant's activity is advisory, see also at [22] of the judgment of the Court. At paragraph 21 the Advocate General said that the list in the third was too heterogeneous to constitute a genus or class and liberal professions were not the key. The concept of liberal professions was very wide, the Court referred to activities being carried out in an independent manner.
40. He said that all of the supplies to AETRSCo whether multiple supplies or (as Customs contended) single supplies fell within the third indent of Article 9.2(e) considered as a whole, consisting of real estate consultancy and accounting and data processing in so far as not subsumed into the real estate consultancy. The matter must be approached from the objective of the recipient of the supplies, AETRSCo, considering what AETRSCo obtained for the consideration provided: it wanted to deal with issues arising from its consumption of property.
41. Mr Cordara said that the streams were intrinsically independent and economically dissociable. As in Bophuthatswana National Commercial Corp Ltd v Customs and Excise Commissioners [1993] STC 702 there was here a suite of services although under one umbrella; the Court of Appeal held that it was wrong to use a blanket approach when deciding on the tax treatment. He said that case would be decided in the same way today. In Customs and Excise Commissioners v Wellington Private Hospital Ltd [1997] STC 445 Millett LJ said at page 463 that the reduction of multiple to single supplies is only appropriate in a relatively simple transaction. This was not such a transaction. In Customs and Excise Commissioners v Madgett & Baldwin (Cases C-308/96 and C-94/97) [1998] ECR I-6229 the Court of Justice said at [20] that the travel services which could not be carried out without a substantial effect on the total package price were not purely ancillary. Here the cost of the different elements was significant. In Finanzamt Heidelberg v iSt (Case C-200/04) [2006] STC 52 the Court referred to Madgett and Baldwin when stating that the services in question did not represent a marginal share. In Levob Verzekevingen BV v Staatssecratis van Financien (Case C-41/04) [2006] STC 766, the facts were the reverse of the present in that services were being received from USA; the customisation was so inseparable from the basic software that there was a single supply; that was a case of economic indissociability. In the present case the streams are not so interdependent. He also referred to Aktiebolaget NN v Skatteverket (Case C-111/05) not yet reported where the Advocate General built on Madgett and Baldwin regarding the cost element of the total price as very significant. Here the price of each stream was significant and the streams were not economically indissociable: no stream predominated. In Levob and Aktiebolaget NN the connection between goods and services was very intimate. In Levob the Court assumed that there was a predominant element, since otherwise the test at [27] to determine the character of the supply could not be applied. Here Customs could not show the necessary fusion for a single supply, if any element was taken away the others could still function.
42. He said that the Appellant's fall back position, if the Tribunal was against him to any extent as to Article 9.2(e), was that Article 9.2(a) applied rather than Article 9.1. Article 9.1 did not take precedence being a residual category, see RAL (Channel Islands) Ltd v Customs and Excise Commissioners (Case C-452/03) [2005] STC 1025 per the Advocate General at paragraph 24. In Heger Rudi GmbH v Finanzamt Graz-Stadt (Case C-166/05) (not yet reported) the Court said at [24] that there must be a sufficiently direct connection with immoveable property for Article 9.2(a) to apply. The connection must be with specific property. This would involve apportionment which could be addressed in a further hearing. Project management was clearly concerned with specific property so that if Article 9.2(e) did not apply, Article 9.2(a) did. Even if the Tribunal concluded that there were single overall supplies, it was still necessary to characterise the dominant element and whether it was within Article 9.2(a). Again the Tribunal might conclude that there were two streams, finance and the remainder : the same issue would arise.

Submissions for Customs

43. Mr Mantle said that the issue as to whether there were single or multiple supplies logically comes before considering whether the supplies fell within the third indent of Article 9.2(e). He accepted that Article 9.2(e) had direct effect but submitted that here there were single supplies which did not fall within Article 9.2(e). The issue whether there were single supplies was not affected by the fact that there were continuous supplies of services. The Tribunal should identify what was done for the consideration paid and should then apply the legal test at [22] of the judgment in Levob [2006] STC 766, namely whether the elements were "so closely linked that they form, objectively, a single, indivisible economic supply, which it would be artificial to split."
44. He said that it is not correct that the approach to single or multiple supply is always based on whether there are principle and ancillary supplies with the principle supplies predominating, see Lord Walker at [30] in College of Estate Management v Customs and Excise Commissioners [2005] STC 1597. In Card Protection Plan Ltd v Customs and Excise Commissioners (Case C-349/96) [1999] STC 270 the guidance at [27] was not exhaustive. Levob laid down another test at [22].
45. He said that in view of the observations of Lord Hoffman at [19] in Beynon v Customs and Excise Commissioners [2005] 1 WLR 86, the Tribunal should consider very carefully whether any benefit was obtained from Bophuthatswana and Wellington which preceded Card Protection Plan. At [31] Lord Hoffman referred to the level of generality corresponding with social and economic reality.
46. Mr Mantle said that in College of Estate Management Lord Rodger considered whether it was artificial from an economic point of view to split the elements of the supply. This was shortly before the judgment in Levob but was in line with Levob. The test at [22] was the nub of the present case. It was a separate test from the principle/ancillary test; Customs relied on the Levob test and not on the principle ancillary test. The references to the cost of different elements in Madgett and Baldwin has nothing to do with the Levob test; in Levob neither element of the supply was only a small part of the package price. In Aktiebolaget NN the cost of the materials and works was not decisive.
47. Mr Mantle said that all of the elements related to the properties of the American Express group and predominantly to EMEA countries. The Appellant was a subsidiary of AETRSCo and was the middle tier of management for the EMEA. There was a single head of REGUK to whom the teams reported; the Appellant ensured that everything done regarding group properties in the EMEA accorded with group policies; the teams were located together and had specific links. He submitted that it was artificial to split the transactions into separate supplies.
48. Mr Mantle said that a single supply could have a unique character not enjoyed by any of its elements. It was wrong to dissect a single supply when applying the test under Article 9.2(e).
49. He said that the third indent to Article 9.2(e) should be interpreted purposively, being read neither unduly broadly nor unduly narrowly. The focus should be on the services of consultants or similar services and of accountants and similar services. In Dudda v Finanzamt Bergiseh Gladback (Case C-327/94) [1996] STC 1290 the Court stated the overall purpose of Article 9.2 in the light of the seventh recital which gave a paradigm example, see the words following "in particular". The Appellant's case was far removed from that purpose.
50. He said that in Linthorst [1997] STC 1297 the Court said at [20] that it is a common feature of the disparate activities in the third indent that all come under the heading of liberal professions. He said that the essence of consultancy is that it is advisory; a vet does too much to be advisory. Here the Appellant did more than just advising. In Von Hoffman the Court held that arbitration services were not services principally and habitually provided by lawyers and not similar. The cases give no encouragement to a wide reading of Article 9.2(e). In Adam v Administration de l'enregistrement et des douanes (Case C-269/99) [2003] BTC 5240 the Court considered the meaning of "liberal professions" in relation to reduced rates, requiring a marked intellectual character, high level qualification and strict professional regulation. He referred to The Indian Palmist v Customs and Excise Commissioners (2003) Decision 18397.
51. He said that in order to fall within Article 9.2(e) activities of an accountant must be those principally and habitually carried out by accountants. He accepted that an updated construction should be applied and that large firms may have expanded their activities but this did not mean that accountants principally and habitually had done so. Many qualified accountants carry out business management functions but those remained management functions. Again there was a big difference between those managing and taking decisions and consultants providing advice. Once a person is deciding what a business should do or authorising actions he is no longer acting as a consultant or accountant. The Appellant did too much to fall within the third indent.
52. Mr Mantle said that the activities within the third indent of Article 9.2(e) were distinct but not necessarily mutually exclusive. The activities by REGUK went well beyond any of those activities. It was possible to have a single supply straddling two activities within the indent, but if a combination of supplies did not all fall within the activities in the indent, Article 9.2(e) did not apply. Here AETRSCo had delegated a range of functions to REGUK.
53. He said that REGUK ensured that everything done regarding properties occupied by Group companies in the EMEA was done in accordance with Amex standards and policies. It was essentially a tier of the Group management exercising oversight. Management is not the same as giving advice. The Appellant lacked the independence which is a feature of liberal professions. Facilities Management, Transactions Management and Project Management all went beyond the third indent. The approval of leases and projects was essentially management. While the Finance team performed various accountancy functions, it supported the activities of the head of REGUK and the other teams, it was integrated within the three tier management structure and was involved in cost control, cost allocation and payment. Those said to be providing "Blue Sky Thinking", in particular the Head of REGUK, was involved in management and managing personnel. He had a role in approving budgets and in approving leases.
54. Mr Mantle said that the activities in issue in very large part went beyond those of the third indent to Article 9.2(e). Insofar as advice was given, other combined activities went beyond this. Viewed as single supplies the essential features of the activities supplied did not fall within the third indent. Such activities as did fall within the third indent did not predominate. Even if there were separate supplies, none fell within the third indent.

Conclusions

55. We have identified the following four questions as arising:

Are Customs correct in contending that there were overall composite continuing supplies as opposed to separate continuing supplies;

If there were composite continuing supplies, did such supplies fall within the activities in the third indent of Article 9.2(e), or did such supplies go beyond the third indent or beyond Article 9.2(a);

If there were not composite continuing supplies but separate continuing supplies were there five separate streams or were there fewer and, if so, what were those streams;

If there were separate streams, in respect of each stream did that stream either fall within the third indent of Article 9.2(e) or within 9.2(a)?

56. Before considering whether there were composite or separate supplies it is necessary to identify what was supplied to AETRSCo in return for the consideration received by the Appellant. This presents considerable difficulties because of the relationship between the parties and the absence of any contract in writing even by an exchange of letters. Although the inter-company charges to AETRSCo were calculated by reference to cost centres with an uplift, there was no indication that any real thought was given as to whether there were composite or separate supplies until several years after the decision under appeal. It appears that although legally independent the Appellant was in fact told by AETRSCo what supplies to make.
57. It is clear from Levob that when deciding whether two or more elements or acts supplied to a customer constitute a single supply, the transactions must be considered objectively on the basis that the customer is a typical customer. Madgett and Baldwin at [24] shows that it is necessary to consider the aim of customers; the reference to customers being in the plural shows this to be objective. This paragraph was cited by the Court of Justice in Card Protection Plan [1999] STC 270 at [30].
58. The evidence presented concentrated on the streams or cost centres of the Appellant rather than on what the customer, AETRSCo, obtained.
59. In our judgment the starting point must be rather to consider the supplies from the viewpoint of AETRSCo. Given the relationship of the parties and the type of supply the reference in Levob to a typical customer has limited relevance, however since the Tribunal is not concerned with the subjective intention of AETRSCo the fact that there was no witness from AETRSCo is not important.
60. It is apparent from the evidence that the Group overall is tightly controlled from the Head Office in New York, certainly in relation to any matters pertaining to real estate. There was no direct evidence as to the financial arrangements within the Group, however it is clear from the documentation referred to at paragraph 36 that approval for leasing transactions by local business units was required from the Appellant and for transactions involving more than $½ million was required from New York. That figure included future lease commitments as well as initial capital expenditure. We infer that either the local business units did not hold balances sufficient to cover expenditure of this type or that such units were not authorised to apply such balances without prior approval. No doubt those were protocols, however they were not in evidence.
61. It was not apparent from the evidence for what transactions approval was required from the Appellant or AETRSCo and what could be done without approval. The evidence was that the Appellant instructed local brokers to negotiate with the landlord on a rent review or lease extension as well as considering the outcome of the negotiations (see paragraph 32). It appears from paragraph 31 that the Appellant paid suppliers' invoices recharging the local business units; it would be surprising if this did not involve approval of the sums to be paid.
62. It is not clear whether the Appellant approved the real estate budgets for local business units, however, if it did not do so, it nevertheless passed the budgeting information up to AETRSCo.
63. On the evidence, we conclude that the Appellant either gave approval to lease and other transactions by local business units or participated in the approval process when the approval of AETRSCo was also required. In doing this the Appellant was fulfilling a management function. The same is true if the Appellant was required to approve local real estate budgets.
64. In addition to giving (or refusing) approvals, the Appellant also gave information and advice to local business units as to real estate matters. The extent of this is unclear, since it depends on the degree of autonomy enjoyed by local business units.
65. Apart from giving advice and information to local business units, the Appellant also provided information, reports and recommendations to AETRSCo to enable AETRSCo to perform its role in the Group structure.
66. It seems to us therefore that the supplies obtained by AETRSCo for the payments to the Appellant formed three broad categories : the performance of those management functions which AETRSCo had delegated to the Appellant including approval of lease transactions; the provision of advice, information and support to the local business units in relation to real estate; and the provision to AETRSCo itself of reports, information and recommendations.
67. That does not necessarily determine whether the supplies which were continuous supplies were properly divisible into those elements when considering whether they were composite supplies. The streams relied on by Mr Cordara were based on the Appellant's cost centres which in turn reflected the Appellant's internal organisation and the personnel involved. However it does not appear from the evidence that any of the streams was wholly discrete. All teams relied on information provided by the Finance team and that team relied on information from the other teams, apart from the Blue Sky thinkers. From 2002 Project Management was separate from Transactions Management but prior to 2002 did not form a separate cost centre. The Blue Sky thinkers clearly needed information from the four teams. We take account of the evidence that Transaction Management was outsourced to Trammel Crow from 2001 and that Johnson Controls was responsible for facilities management and financial administration, however the outsourcing cannot have been complete because of the need for input from other teams.
68. We conclude, therefore, that if there were separate continuous supplies these can only have been divisible into the categories based on AETRSCo's aims which we have identified at paragraph 64.
69. It was common ground that the Card Protection test involving principle and ancillary supplies was not satisfied, there being no predominant supplies. The issue is whether the elements were "so closely linked that they form, objectively, a single indivisible economic supply, which it would be artificial to split," see Levob at [22].
70. In respect of the Levob test the matters to which we have referred at paragraph 67 are also relevant. This test does not depend on whether an element could have been outsourced, but rather on whether splitting out such element would have been uneconomic or artificial. Since in effect the Appellant was a tier of the Group management structure, it would no doubt have been possible for certain functions to be carried out by AETRSCo without the Appellant. It is difficult to see how the management aspects could have been outsourced to a company outside the Group. Some of the management functions could have been left to a lower tier inserted above the local business unit. However if the Project Management was excluded from the Appellant's supplies, it would seem that there would have been no reduction in the supplies required from the Finance Team which would itself have needed information from the outsourced unit. It seems to us that splitting off any of the elements would have added to the overall costs of the Group. We consider that the difficulty of identifying a rational basis of splitting the supplies indicates that this would be artificial.
71. We consider that the supplies by the Appellant to AETRSCo were so closely linked that they formed objectively single indivisible economic supplies which it would be artificial to split. We observe that although we posed the first question in terms of whether Customs' contention was correct, the burden of proof was on the Appellant. In so far as it is a question of fact, the burden has not been satisfied.
72. That brings us to the second question which we can address quite shortly. We accept the submission of Mr Cordara that in order to come within Article 9.2(e) the Appellant does not have to show that the supply falls within any one of the specific heads of the third indent. Mr Mantle did not dispute this, see paragraph 51 above. However we accept Mr Mantle's submission that the combination of supplies, or composite supplies, must fall within the activities listed in the indent although straddling more them one. In our judgment the activities of the Appellant did go beyond those listed in the indent in that the Appellant was clearly involved in management and in taking decisions. In our view it was no accident that three of the streams identified by the Appellant were Transaction Management, Project Management and Facilities Management. In view of the evidence, we consider that those were not mere labels but were a proper description of various aspects of the supplies to AETRSCo.
73. We do not consider that the composite continuous supplies came with Article 9.2(a) since, although parts of the supplies clearly did relate to specific property, there was no dominant element of the composite supplies which did have the necessary direct connection with specific property. In view of our conclusion on the first question we identified, questions 3 and 4 do not arise.
74. The result is that Article 9.1 applied and the appeal is dismissed.

THEODORE WALLACE

CHAIRMAN

RELEASED: 16 July 2008

LON 2003/0183