Services provided by lawyers, accountants, engineers and other members of the so-called liberal professions to clients outside the EU are free from VAT. In a ground-breaking decision, the Upper Tribunal (UT) has extended that advantage to a high-end matchmaking company that helps well-heeled clients to find love.
The company’s core business model was to remove many of the risks associated with dating by taking on the role of an active intermediary. Amongst other things, it had face-to-face contact with clients and carefully verified their credentials. Clients paid £15,000 for an entry-level package of introductions and those who wanted a more custom or bespoke matchmaking service paid up to £140,000.
In asserting that the services it provides to non-EU clients fell outside the scope of VAT, the company cited Article 59(c) of the Principal VAT Directive. That article provides an exemption from VAT in respect of the services of consultants, engineers, consultancy firms, lawyers, accountants and other similar services provided to clients belonging outside the EU. The exemption extends to data processing and the provision of information.
HM Revenue and Customs (HMRC), however, took the contrary view and raised VAT assessments against the company for more than £1.7 million in respect of a period of almost four years’ trading. The company’s challenge to that decision was rejected by the First-tier Tribunal.
In upholding the company’s appeal against that outcome, the UT ruled that the benefit of the exemption is not confined to services provided by members of the liberal professions. The company exercised a high degree of expertise in giving advice and information to its clients, and the consultancy or similar services that it provided to clients outside the EU fell within the ambit of the exemption.
The company also provided post-introduction liaison services, which HMRC argued could not qualify for VAT exemption. The UT found, however, that a typical consumer would view the provision of expert advice and information relating to potential matches – services which did so qualify – as the predominant element of the company’s business.