United Utilities Plc v Customs & Excise

The betting and gambling exemption in Article 13B(f) of the EC Sixth Council Directive on VAT 77/388/EEC, and the corresponding Value Added Tax Act 1994 exemption, does not extend to an agent whose supply to a bookmaker is purely administrative. Mechanically handling calls, communicating acceptance under the bookmaker’s criteria and providing IT support is not the provision of betting facilities where the bookmaker retains control of the bets, risk and odds. Other Article 13B exemptions, including express provisions for agents or negotiation, create no general extension to betting agents. The majority treated the answer as acte clair and dismissed the appeal; Arden LJ would have referred the question to the European Court of Justice.

United Utilities plc, representative member of a VAT group, appealed from Ferris J in the Chancery Division. Vertex, a group member, supplied Littlewoods with premises, equipment, personnel, IT and telephone call-handling services for Bet Direct. Littlewoods selected events, set odds, assessed bets, retained financial risk and handled customer money. The VAT Tribunal and Ferris J treated Vertex’s services as standard-rated call-centre and IT support, rather than exempt betting facilities. Before the Court of Appeal, the Commissioners accepted that the lower decisions would be erroneous if Community law extended the exemption to an agent in Vertex’s position, but argued that the issue was uncertain and should be referred. The central question was whether the exemption covered an agent whose actions consummated a betting transaction, or required the agent also to control and assess bets and set odds.

Disposition. Jacob and Auld LJJ formed the majority and dismissed the appeal. Arden LJ considered that the Community-law issue was not acte clair and would have referred it to the European Court of Justice.

1. Nature of the supply. The relevant supply was Vertex’s supply of services to Littlewoods, not Littlewoods’ supply of betting services to its customers. Vertex provided call-centre and IT support. Its employees communicated acceptance according to criteria fixed by Littlewoods and had no discretion over strategy, risk, bet assessment or odds. The majority therefore treated the services as administrative services, not facilities for placing bets under Article 13B(f) or Group 4 Item 1 of Schedule 9 to the Value Added Tax Act 1994.
2. Purpose of the exemption. The majority relied on the rationale discussed by Advocate General Jacobs in H.J. Glawe Spiel v Finanzamt Hamburg-Barmbek-Uhlenhorst [1994] STC 543 and Advocate General Stix-Hackl in Town and County Factors Ltd v Customs and Excise Commissioners [2002] STC 1263. The exemption concerns the framework within which gambling occurs. In betting, that framework includes control and assessment of bets and the setting of odds. Mechanistic communication of the bookmaker’s decision did not amount to providing that framework.
3. Comparison with other exemptions. The decisions relied on by Vertex, including Sparekassernes Datacenter v Skatteministeriet [1997] STC 932, CSC Financial Services Ltd v Customs and Excise Commissioners [2002] STC 57, Customs and Excise Commissioners v FDR Ltd [2000] STC 672 and Customs and Excise Commissioners v Electronic Data Systems Ltd [2003] STC 688, did not establish a general principle extending every exemption to administrative agents. The express treatment of agents in Article 13B(a), and of negotiation in Article 13B(d)(3), (4) and (5), showed that inclusion depended on the wording and rationale of the particular exemption. Card Protection Plan v Customs and Excise Commissioners [1999] STC 270 ECJ was distinguished because its facts and the express insurance-agent wording did not govern betting.
4. Agency deeming provision. Section 47(3) of the Value Added Tax Act 1994, implementing Article 6(4) of the Directive, concerns services supplied through an agent acting in his own name. It permits a single supply from principal to recipient to be treated as supplies to and by the agent. It does not govern the separate supply of services by the agent to the principal and did not make Vertex’s services exempt.
5. Reference. Arden LJ considered that the European Court of Justice jurisprudence did not clearly resolve whether an agent whose acts consummated a betting transaction was covered by Article 13B(f), and proposed a reference. Jacob LJ considered the answer plain, and Auld LJ agreed. No reference was made.

The order was: appeal dismissed; no order for costs in the appeal; the High Court costs order remained undisturbed; and leave to appeal to the House of Lords was refused.

• Court of Appeal (Civil Division): dismissed the appeal by majority; Arden LJ would have referred the Community-law question to the European Court of Justice: [2004] EWCA Civ 245.
• High Court of Justice, Chancery Division: Ferris J dismissed the appeal from the VAT Tribunal and agreed that Vertex supplied standard-rated call-centre and IT support services.
• VAT Tribunal: held that Vertex supplied standard-rated call-centre and IT support services rather than exempt betting facilities.