In JPMorgan Chase Bank NA v HMRC [2025] UKUT 188, the Upper Tribunal (UT) found that the First Tier Tribunal (FTT) had not erred in law when it found that the disregard for intra-group supplies did not apply to services supplied between group members.
JPMorgan Chase Bank NA (CBNA) and JPMorgan Securities Plc (SPLC) were part of the same global corporate group and the same UK VAT group, due to CBNA having a UK branch.
- CBNA supplied 'support services' and 'business delivery services' to SPLC. Support services were administrative in nature, including legal, HR, compliance and finance. Business delivery services provided a trading infrastructure, including technology, operations and market risk, without which SPLC could not trade.
- These services would ordinarily be disregarded between UK VAT group companies.
- The provision of services was dealt with under a master services agreement and billed in a lump sum using the group billing software. It was not possible to identify exempt and non-exempt services or even individual services as part of the agreement. CBNA provided all of these services to group affiliates.
- It was confirmed that SPLC would not have been able to decline any of the services, as they ensured standardisation across the global group.
- To supply some of the services, CBNA bought in overseas providers to make supplies to SPLC.
- HMRC argued that this disapplied the intra-group transaction disregard, as per s.43 (2A) and (2B) VATA 1994. Section 2A provides that the disregard for intra-group supplies of services does not apply if the service in question is:
- Not exempt as per Schedule 9 VATA 1994.
- Initially made to a person who did not belong in the UK.
- Then made to a business person in the UK.
- If the disregard does not apply, VAT on the supply should be accounted for as though the representative group member made the supply to itself.
- CBNA accepted that the support services were subject to VAT.
- As part of ongoing wider enquiries into the JPMorgan business, HMRC raised protective assessments which included disapplying the intra-group exemption and treating all services as a Single supply subject to standard-rated VAT.
- CBNA appealed to the First Tier Tribunal (FTT).
The FTT found that:
- The services agreement did reflect the economic reality at the time.
- All of the services were required by SPLC for it to trade, so no distinction could be drawn between the support services and the business delivery services.
- All elements of the supply were closely linked and not available separately.
- This, and the wording of the agreement indicated a single supply of all the services provided.
- Despite the test in Gray & Farrar International LLP v HMRC [2023] EWCA Civ 121, it was not possible to identify a principal element of the supply; all elements were equally necessary. As such, the supply as a whole had to be standard-rated.
- There was one single supply of services that was not to be disregarded as an intra-group supply and was not exempt as a supply of financial services. The appeal was dismissed.
CNBA appealed to the Upper Tribunal (UT). Their grounds of appeal were broadly based on the assertion that the FTT had erred in law by misapplying legal principles.
The UT found that:
- The FTT had not erred in law when it found that just one single supply of services had been made. This meant that individual elements of the supply could not be considered to be exempt.
- CNBA’s other ground for appeal was that many of the elements of the service supplied qualified for the securities exemption in items 5 and 6 of Group 5 Schedule 9 VATA 1994. The FTT’s interpretation of the securities exemption was sufficiently wide: “the exemption remains focused on the transaction itself and does not extend to services that merely facilitate or cause such changes. The securities exemption, like the payments exemption, requires a functional focus on the transaction itself.”
- The services in question facilitated securities transactions but did not execute them. The exemption did not, therefore, apply.
- The services provided between the group members did not qualify for the intra-group disregard.
The appeal was dismissed.
Useful guides on this topic
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Groups (VAT)
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A beginner's guide to VAT
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