ECJ rules on abusive practices and relevance of contractual terms for supply of services under Sixth

24/06/13

In its judgment in Case -653/11 HRMC v Newey, the European Court of Justice has given an important ruling concerning the supply of services under the Sixth VAT Directive, specifically the notion and treatment for such tax purposes of abusive practices.

The Court held that contractual terms, while constituting a factor to be taken into consideration, are not decisive for the purposes of identifying the supplier and the recipient of a ‘supply of services' within the meaning of Articles 2(1) and 6(1) of the Directive. In particular, contractual terms may be disregarded if it becomes apparent that they do not reflect economic and commercial reality, but constitute a wholly artificial arrangement which was set up with the sole aim of obtaining a tax advantage, which it is for the national court to determine. That determination will now be made by the Upper Tribunal (Tax and Chancery Chamber), the referring court.

The judgment is here.