Advocate General of the Court of Justice of the EU

The Wellcome Trust (C-459/19) case involved a charitable organisation (Wellcome Trust Limited) which used the services of investment managers to assist it in managing its large endowment portfolio. The endowments generated very significant annual income which was then disbursed by WTL by way of grants for the purposes of medical and pharmaceutical research.

Some of the investment management services were supplied by businesses established outside the EU. The services were used for the charity’s investment activities which a 1996 Wellcome Trust decision of the ECJ (C-155/94) found were non-economic activities.

The question was whether the taxpayer was “a taxable person acting as such” within the meaning of article 44 PVD when receiving the investment management services. The result of falling within article 44 was that the place of supply of the services would be the UK and the taxpayer would have to operate the reverse charge and consequently suffer irrecoverable VAT. If the services could be said to be supplied to a non-taxable person, they would be within article 45 PVD and the place of supply would be where the supplier was established (and therefore potentially outside the scope of VAT).

It was agreed between the parties that WTL was a taxable person, that its non-economic activities were not private activities but rather business activities and that it did not use the investment management services to make taxable supplies.

The Advocate-General has opined that given the context of the words “acting as such” within article 44 (for example the deeming provisions within article 43), the objective of the place of supply rules, and the “intent of the Union legislature to cast the net broadly in relation to the scope of application of the ‘destination rule’”, the supplies to WTL were within the scope of article 44 and that WTL should therefore have to account for VAT under the reverse charge. Read more

DLA Piper comment: It is perhaps rather surprising that the AG has opined that the exact same wording in two parts of the PVD should bear different meanings and one can certainly sympathise with WLT and their arguments that if they were not a “taxable person acting as such” in relation to their investment activities then they should be treated in the same way in relation to the services they receive for those activities.

The AG has taken the view that the deeming provisions in Article 43 override that simple and attractive argument, which is perhaps an argument as to why deeming provisions (which so often appear to create confusion in interpretation) should be avoided in legislation wherever possible.

Of course, since this is merely the opinion of the AG, we will need to await the final decision of the ECJ on the issue.