In All Answers Ltd v HMRC[2023] UKFTT 737 (TC) (23 August 2023),the FTT held that a company was not acting as agent in relation to essay writing services and was therefore required to account for VAT on the full payment received from end customers for those services.
All Answers ran an internet-based business through which customers could order academic work (essays, dissertations, etc.) which were written by third-party writers. These writers were typically teachers, lecturers or PhD students and were not employed by the company. All Answers would share the fee paid by the customer with the writer.
The key question was whether the company was acting as agent of the third-party writers and therefore only obliged to account for VAT on its share of the customer’s payment. If acting as principal, it was required to account for VAT on the full value of the payment made by the customer.
If the facts appear familiar it is because they had essentially been litigated before, with the Upper Tribunal (UT) holding that there was a supply of the academic work by All Answers as principal. However, the company now returned to the FTT having made some changes to its contractual terms. All Answers considered that the revised contracts were consistent with the agency relationship they believed they held with the writers and customers. The company’s essential business was, however, unchanged.
The FTT concluded that the contractual changes did not alter the core obligations to deliver the product. These obligations were imposed on All Answers alone. Therefore, the reasoning of the UT continued to apply. All Answers was still required to account for VAT on the full payment received from the customer.
The FTT noted that if it was wrong and the updated contracts did impose core obligations on the third-party writers, then it would have found this to be inconsistent with the commercial and economic reality. This was despite the FTT’s acceptance that the contractual position does normally reflect economic and commercial reality.
Why it matters: This case is a reminder of the importance looking at both contractual terms and economic and commercial reality as part of a VAT analysis. In the event, changes to the contracts were insufficient to alter the core legal obligations of the company. However, even if they had been successful, it seems that there would have been an uphill battle for the taxpayer given that the UT had already held the previous contracts reflected the reality and there had been no change to the essential business model.
In All Answers Ltd v HMRC[2023] UKFTT 737 (TC) (23 August 2023),the FTT held that a company was not acting as agent in relation to essay writing services and was therefore required to account for VAT on the full payment received from end customers for those services.
All Answers ran an internet-based business through which customers could order academic work (essays, dissertations, etc.) which were written by third-party writers. These writers were typically teachers, lecturers or PhD students and were not employed by the company. All Answers would share the fee paid by the customer with the writer.
The key question was whether the company was acting as agent of the third-party writers and therefore only obliged to account for VAT on its share of the customer’s payment. If acting as principal, it was required to account for VAT on the full value of the payment made by the customer.
If the facts appear familiar it is because they had essentially been litigated before, with the Upper Tribunal (UT) holding that there was a supply of the academic work by All Answers as principal. However, the company now returned to the FTT having made some changes to its contractual terms. All Answers considered that the revised contracts were consistent with the agency relationship they believed they held with the writers and customers. The company’s essential business was, however, unchanged.
The FTT concluded that the contractual changes did not alter the core obligations to deliver the product. These obligations were imposed on All Answers alone. Therefore, the reasoning of the UT continued to apply. All Answers was still required to account for VAT on the full payment received from the customer.
The FTT noted that if it was wrong and the updated contracts did impose core obligations on the third-party writers, then it would have found this to be inconsistent with the commercial and economic reality. This was despite the FTT’s acceptance that the contractual position does normally reflect economic and commercial reality.
Why it matters: This case is a reminder of the importance looking at both contractual terms and economic and commercial reality as part of a VAT analysis. In the event, changes to the contracts were insufficient to alter the core legal obligations of the company. However, even if they had been successful, it seems that there would have been an uphill battle for the taxpayer given that the UT had already held the previous contracts reflected the reality and there had been no change to the essential business model.
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