“ Article 2(1) The following transactions shall be subject to VAT: (a) the supply of goods for consideration within the territory of a Member State by a taxable person acting as such; (b) … (c) the supply of services for consideration within the territory of a Member State by a taxable person acting as such…” “Article 9 1. Taxable person' shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity. Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as 'economic activity'. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity. 2. In addition to the persons referred to in paragraph 1, any person who, on an occasional basis, supplies a new means of transport, which is dispatched or transported to the customer by the vendor or the customer, or on behalf of the vendor or the customer, to a destination outside the territory of a Member State but within the territory of the Community, shall be regarded as a taxable person.”
“Article 168 In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay: (a) the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person; (b) the VAT due in respect of transactions treated as supplies of goods or services pursuant to Article 18(a) and Article 27; (c) the VAT due in respect of intra-Community acquisitions of goods pursuant to Article 2(1)(b)(i); (d) the VAT due on transactions treated as intra-Community acquisitions in accordance with Articles 21 and 22; (e) the VAT due or paid in respect of the importation of goods into that Member State.”
“41 It is also apparent from the case-law of the Court that the term supply of services is therefore objective in nature and applies without regard to the purpose or results of the transactions concerned and without its being necessary for the tax authorities to carry out inquiries to determine the intention of the taxable person (see, to that effect, Halifax and Others , paragraphs 56 and 57 and the case-law cited). 42 As regards in particular the importance of contractual terms in categorising a transaction as a taxable transaction, it is necessary to bear in mind the case-law of the Court according to which consideration of economic and commercial realities is a fundamental criterion for the application of the common system of VAT (see, to that effect, Joined Cases C‑53/09 and C‑55/09 Loyalty Management UK and Baxi Group [2010] ECR I‑9187, paragraphs 39 and 40 and the case-law cited). 43 Given that the contractual position normally reflects the economic and commercial reality of the transactions and in order to satisfy the requirements of legal certainty, the relevant contractual terms constitute a factor to be taken into consideration when the supplier and the recipient in a ‘supply of services’ transaction within the meaning of Articles 2(1) and 6(1) of the Sixth Directive have to be identified. 44 It may, however, become apparent that, sometimes, certain contractual terms do not wholly reflect the economic and commercial reality of the transactions. 45 That is the case in particular if it becomes apparent that those contractual terms constitute a purely artificial arrangement which does not correspond with the economic and commercial reality of the transactions.”
“36 Mr Conlon submitted, by reference to Redrow and Aimia, that the test of economic reality is not based, as the FTT stated in [92], on whether final consumption is taxed but on whether the contractual terms constitute a purely artificial arrangement. UDL’s case was that the FTT conflated economic reality with final consumption and that was an error of law. Mr Conlon submitted that the CJEU’s decision in Newey showed that economic reality was only lacking where there was some artificiality. He argued that the FTT were wrong to say that the provisions of the contract were trumped by economic reality in this case and contended that the FTT should have said that there was no scope for applying economic reality in the absence of artificiality. We do not accept that submission. As the CJEU observed in Newey at paragraphs 43 - 45, the contractual position normally reflects the economic and commercial reality of the transactions but will not do so where, in particular, those contractual terms constitute a purely artificial arrangement which does not correspond with the economic and commercial reality of the transactions. It was common ground in this case that the contracts between UDL and the Repairers were not artificial but we do not consider that to be the end of the inquiry. As the use of the words “in particular” by the CJEU in Newey show, artificiality is not the only test of economic reality. 37 The fourth principle, namely that regard must be had to all the circumstances in which the transaction or combination of transactions takes place, is not controversial. Where there are multiple contracts and participants, it is necessary to look at the transactions as a whole in order to determine their economic reality. HMRC’s position is that the FTT did have regard to all the circumstances in this case. 38 In conclusion, we consider that it is clear from Airtours and the cases referred to in that case that determining who is receiving a supply is a two-stage process. The starting point is to consider the contractual position and then consider whether, taking account of all the circumstances, the contractual analysis reflects the economic reality of the transaction.”
“115 Left to my own devices, I would have been inclined to conclude that, because the necessary degree of reciprocity between the relevant supplies and the payments will exist as long as the contingency is satisfied and the parties intended at the outset that the contingency would be satisfied, this should be treated in the same way as any other situation where a person intends to make future supplies which will definitely be for a consideration. If that is right, then I would necessarily conclude that, in the period prior to the Threshold Date, the Appellant was carrying on an economic activity by virtue of its intention to make supplies for a consideration in the future even though it was not making supplies for a consideration during that period. 116 However, the fact that, in the middle of paragraph [136] of its decision (in Norseman ), the Upper Tribunal has added the words “(although I would remark that, even if the intention was full cost recovery, there would still remain uncertainty about whether payment would be made at all, let alone about exactly when)” suggests that the view I would have been inclined to reach would be at odds with those of the Upper Tribunal in Norseman . Whilst the words in question are obiter and are therefore not binding on me, I am reluctant to depart from the view of a superior court on a point which is of such significance and difficulty. 117 Accordingly, I have concluded that, although the contrary is certainly arguable, during the period prior to the Threshold Date, the Appellant did not have the intention to make future supplies for a consideration and was therefore not carrying on an economic activity for the purposes of Article 9 PVD.”
“94 It is plain that merely holding 'a rather vague intention to levy an unspecified charge, at some undefined time in the future' is not 'enough' as the Judge (in the FTT) held at Decision [49]. A mere hope of payment in the future is not a sufficient basis on which to recover input tax as an intending trader. Nor is the stated subjective intention of the company directors sufficient, if unsupported (as here) by objective evidence. Similarly, the Judge was entirely right to hold that there was no reciprocity of obligation because 'what was lacking here was any common understanding of what was payable, when and in what circumstances'. 95. These findings are fatal to Norseman’s case that it had (during the relevant period) an intention to make supplies in return for sums capable of amounting to consideration for VAT purposes at some point in the future. 96. Without the relevant intention to make supplies for consideration, Norseman is unable to establish that it intended to make taxable supplies so as to enable it to recover input tax during the relevant period. Accordingly, the Judge was entirely right to conclude that it was not entitled to the input tax it sought to recover.”
“136 On the facts found by the Judge , Norseman is reduced to reliance on a vague and general intention that payment would be made. This is not a case where the payment could be particularised in any way. Thus, on the facts found , it cannot be said that the intended payment would be full cost recovery (although I remark that, even if the intention was full cost recovery, there would still remain uncertainty about whether payment would be made at all, let alone about exactly when ). Since payment per se is not enough to establish consideration, Norseman has failed to establish that it had an intention, during the relevant period, to make taxable supplies at any time in the future. And it has failed also to establish that consideration was given for the services actually provided during the relevant period. I have not, in reaching this conclusion, relied on the decision in African Consolidated Resources . I would, however, say that I see no reason to doubt that it is correct and do not accept Mr Lall's criticisms of it.”
“Given my conclusion that there was, under both the pre and post-2015 agreements, a legal obligation on the subsidiaries to make payment on demand in relation to the intercompany loans, the fact that it is not discharged does not mean that there has not been consideration for the relevant supply. As such I have come to the conclusion that Tower did make supplies to its subsidiaries for consideration.”
“13 It does not follow from that judgment, however, that the mere acquisition and holding of shares in a company is to be regarded as an economic activity, within the meaning of the Sixth Directive, conferring on the holder the status of a taxable person. The mere acquisition of financial holdings in other undertakings does not amount to the exploitation of property for the purpose of obtaining income therefrom on a continuing basis because any dividend yielded by that holding is merely the result of ownership of the property. 14 It is otherwise where the holding is accompanied by direct or indirect involvement in the management of the companies in which the holding has been acquired, without prejudice to the rights held by the holding company as shareholder.”
“The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity.”
“Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as 'economic activity'.”