So Long, Farewell, Auf Wiedersehen, Adieu –the CJEU gives its last judgment in a reference from a UK Tax Tribunal

28 Feb 2023

Case C-695/20 Fenix International Ltd v HMRC, Court of Justice of the European Union (Grand Chamber), EU:C:2023:127, Judgment of 28 February 2023

Fenix International Ltd operates the well-known website/online social media platform, which allows “Creators” to post content for “Fans” in return for payment. Fenix’s case is that it acts as agent in respect of transactions between Creators and Fans. Fenix charges Creators a 20% commission on all sums paid by Fans, and accounted for VAT in respect of that intermediary service for the accounting periods at issue. Thus, if a Fan pays 100 and Fenix charges the Creator commission of 20, Fenix accounted for VAT on the 20, rather than the 100.

HMRC assessed Fenix for VAT on the basis that Article 9a of Council Implementing Regulation (EU) No. 282/2011, which was directly applicable in the UK prior to IP Completion Day (23:00 GMT on 31 December 2020) and which remains applicable in the UK, deems Fenix to be liable for VAT on the 100. Fenix paid the assessments and has accounted to HMRC for VAT on that basis since HMRC’s decision. However, it appealed the assessments to the First-tier Tribunal (Tax Chamber) (“FTT”), arguing that the deeming provisions go beyond the power to “implement” the Principal VAT Directive, in this case Article 28 PVD, conferred on the Council by Article 397 PVD. Prior to IP Completion Day, any challenge to the validity of an EU Regulation could only be entertained by the CJEU; and a challenge before a national court had to be referred for a preliminary ruling under Article 267 of the Treaty on the Functioning of the European Union (“TFEU”).

On 15 December 2020, the FTT referred a question to the CJEU concerning the validity of Article 9a. On 22 December 2020, the order for reference was registered at the CJEU Registry. On IP Completion Day, the ability of UK courts and tribunals to make Article 267 references (relevantly) ended. The combined effect of the Withdrawal Agreement and the European Union (Withdrawal) Act 2018 is that the CJEU had jurisdiction to entertain the reference and that the FTT and UK are be bound by the CJEU’s answer. See “The Long Goodbye”, news item, 13 January 2021, if only for its prescient headline.

On 15 September 2022, Advocate General Ramos delivered an Opinion rejecting Fenix’s challenge (EU:C:2022:685).

On 28 February 2023, in its last judgment in an Article 267 reference from a UK tax tribunal (and possibly any other UK court), the CJEU (Grand Chamber) gave judgment. The CJEU followed the Advocate General’s Opinion and upheld the validity of Article 9a(1). The Court held-

  • the provisions of Article 9a(1) comply with the essential general aims of the PVD and, in particular, those of Article 28;
  • Article 9a(1) is appropriate, and even necessary, for the uniform implementation of Article 28;
  • the presumption in Article 9a(1) does not alter the nature of the presumption laid down in Article 28, but gives concrete expression to it in the specific context of the supply of electronically supplied services through a telecommunications network, an interface or a portal such as a marketplace for applications;
  • where a taxable person who takes part in the supply of a service by electronic means, by operating, e.g., an online social network platform, has the power to authorise the supply of that service, or to charge for it, or to lay down the general terms and conditions of that supply, that taxable person may unilaterally define essential elements relating to the supply, namely the provision of that service and the time at which it will take place, or the conditions under which the consideration will be payable, or the rules forming the general framework of that service; in those circumstances, having regard to the economic and commercial reality reflected by them, the taxable person must be regarded as being the supplier of services pursuant to Article 28; and the irrebuttable presumption that applies in the circumstances set out in Article 9a(1) gives effect to that economic and commercial reality;
  • accordingly, Article 9a(1) does not supplement or amend Article 28; it does not therefore disregard or exceed the limits of the Council’s implementing power; and is thus valid.

Valentina Sloane KC, leading Max Schofield of 3PB, acted for Fenix.

Andrew Macnab acted for HMRC.

Read the CJEU’s judgment here.

Read the Advocate General’s Opinion here.

Read the FTT’s decision to refer here.