PLACE OF SUPPLY – Special provisions article 9(2) & (3) Directive 77/388 – and section 8 paragraph 3 schedule 5 VATA 1994 - Whether Consultant – Indian palmist – Whether a liberal profession – Consultant has to be a member of a Liberal profession – Appellant not a consultant - Case dismissed

MANCHESTER TRIBUNAL CENTRE

	NASIM MOHAMMED T/A THE INDIAN PALMIST	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	MR D S PORTER  (Chairman)
						MR N H PHILLIPS

Sitting in public in Manchester on 18 July 2003

Richard Barlow of counsel for the Appellant

Lisa Linklater of counsel for the Respondents

© CROWN COPYRIGHT 2003

DECISION

1.	In this appeal by Mr Naseem Mohammed, we are required to decide whether the clairvoyancy and palmistry services he supplies to clients outside the EU are the services of a Consultant for the purposes of section 8 paragraph 3 of Schedule 5 to the Value Added Tax Act 1994, and are thus supplied where received, as he contends, or are supplies of services to which the ordinary rules as to place of supply contained in s. 7 of the 1994 Act apply, as the Commissioners of Customs and Excise maintain. If in the former category the supplies are outside the scope of VAT; if in the latter they are standard rated.
2.	Mr R Barlow of counsel appeared for Mr Mohammed and Mrs L Linklater of counsel appeared for the Commissioners.To assist us in our determination, we were provided with a bundle of copy documents by each party and oral evidence was given by Mr Mohammed.  From that evidence, we find the following facts to have been established.
3.	Mr Mohammed trained as a clairvoyant and palmist with his uncle in Pakistan. His training started when he was 6 years old, and in undertaking the art, he followed a family tradition going back some 200 years.  He himself has practised for upwards of 30 years.
4.	Most of Mr Mohammed’s work is carried out by telephone for persons from the Indian sub-continent and, to a lesser extent, from the United States.  He obtains work from advertisements but more usually by word of mouth recommendations.
5.	Examples of the type of work undertaken by Mr Mohammed were included in the documents he produced and included the following cases which both dealt with clients in the United States of America :-
•	a brother-in-Law to Mrs A brought his wife Mrs B into the family, who usurped Mrs A’s position. After spiritual and astrological calculations and phrenology from Mrs A’s photograph, Mr Mohammed advised that the problem lay with Mrs B’s Mother. After prayers and spiritual healing he regularised the relationships within the family.                                             
•	Mr J ran a Tobacconist shop that was doing very badly. After spiritual and astrological calculations and phrenology from Mr J’s photograph Mr Mohammed advised that there was a Voodoo doll hidden near the cash till. When the doll was destroyed the business picked up. Mr J’s son was also having financial and matrimonial problems. Mr Mohammed arranged for prayers and spiritual healing and the problems were resolved.
6.	On receiving a telephone call from a prospective client, Mr Mohammed will ask them for their date of birth and for a photograph. Based on the personal date supplied and a phrenology reading from the photograph, he then carries out his spiritual and astrological calculations.  He will have regular contact with the client and in many cases will pray for them.  In urgent cases, having made his calculations, he may advise whether action proposed by a client should be taken.   Once their problem has been resolved, he seals his work to ensure that the client suffers no further from the problem.  At any one time, he will have three or four clients.
7.	We find as fact the matters set out in paragraphs 3 to 6 above.
8.	Article 16 of the VAT (Place of Supply of Services) Order 1992 (for which s.7(10) of the 1994 Act makes provision) provides that where there is a supply of certain types of service and the recipient belongs outside the EU “it shall be treated as made where the recipient belongs”.  The types of services to which art 16 relates are set out at section 8 paragraph 3 of Schedule 5 to the 1994 Act as follows:
“Services of Consultants, engineers, consultancy bureaux, lawyers, accountants and other similar services; data processing and provision of information (but excluding from this head any services relating to land).
Those provisions correctly implement art 9(2)(e) of the Sixth EC VAT Directive (77/388/EEC) that sub-article provides that  “the place where the following services are supplied when performed for customers established outside the Community . . . shall be the place where the customer . . . in the absence of [a fixed establishment] . . . has his permanent address or usually resides:
-	. . . .
-	. . .. 
-	Services of Consultants, engineers, consultancy bureaux, lawyers, accountants and other similar services, as well as data processing and the supplying of information”
9.	As far as the legislation is concerned the provision of Schedule 5 section 8 paragraph 3 stand alone and there is no definition for any of the individual items or clarifying note.  Paragraph 3 is intended to give effect of the third indent of article 9(2)(e) of the Sixth VAT Directive.  The object of the Directive was to avoid double taxation and non-taxation.  
10.	Mr Barlow submitted that article 9 has been the subject of several cases dealt with by the Court of Justice of the European Communities (the ECJ). He referred to the following cases to establish that each service should not be considered restrictively; that each should be considered separately; and that it was not essential for a consultant to be a member of a “liberal profession”
10.1	In Dudda v Finanzamt Bergiseh Gladback [1996] STC 1290, the ECJ held that art 9(2) fell to be determined by reference to its purpose, and the Advocate-General (Fennelly) observed that it was not appropriate to read it restrictively, as one would an exemption provision. Further the Advocate General Fennelly observed that it was not possible to follow the “ejusden generis rule” when interpreting each of the services. Annexure F of the Sixth Directive refers specifically to “liberal profession”.  This is not translated into the United Kingdom legislation.  The services of Consultants, engineers, Consultant bureau, lawyers, accountants and other similar services cannot all be “liberal professions” as engineers and Consultant bureau are clearly not.
10.2	 In Lindhorst the ECJ held that the services of a veterinary surgeon did not fall within those provided by a “Consultant”. The Advocate-General (again Fennelly) did not think that the legislator by the third indent of art 9(2)(e) 
“intended to enumerate a catalogue or establish a  genus or class of activities corresponding to those of the traditional notion of liberal professions.  An interpretation which seeks to compare the myriad of possible  forms of modern consultancy work with the social and intellectual prestige – based generally on high standards of educational attainment and strict regulation of ethical and professional behaviour – of the traditional liberal professions would strain considerably the language of the indent.  There is no class of activity in the catalogue which is “similar “ to the normal activities of a veterinary surgeon, and, in my opinion, no common element other than the unsatisfactory notion of liberal professions can be identified to which those activities would be assimilated” (p. 1295). 
10.3	In Bernard von Hoffman Advocate General (again Fennelly) held that the position of an arbitrator carried out by a lawyer did not fall within the services identified in clause 9(2)(e) third indent.  Whether an activity fell within that indent depended on the type of service being given.  The service of an arbitrator was essentially different from the work of a lawyer as one sat in judgment and the other presented the case.
11.	Mr Barlow submitted that the general nature of the services supplied by the Appellant was that he was consulted for guidance and advice in respect of business and personal problems, mostly by clients of Indian sub-continent origin or ancestry.
12.	The guidance and advice given to clients varies as do the methods.  The work involves elements of a spiritual nature, astrology and what would be termed counselling in a European culture, as well as direct advice.
13.	All the European cases related to inter-community VAT. 
14.	Further, the fact that the Appellant’s activities are not capable of being scientifically verified has no foundation in relation to the interpretation of the exemption.  The provisions of the Directive must be culturally neutral.
15.	Mrs Linklater submitted that there had been provided at pages 18-21 of the bundle, details of the Appellant’s cases.  It is clear from those cases that the Appellant relied substantially on spiritual and astrological calculations and phrenology.  At no point however had any of those calculations or reports been produced either to the Respondents prior to hearing or at the Tribunal.
16	This is clearly a case of non-taxation and no difference arises in defining the services within 9.2(e) indent 3 because the services are provided outside of the European Union.
17.   It should also be noted that judgments of the European Court of Justice bind the national courts, but the opinions of an Advocate General are of persuasive value only to the extent that they are not inconsistent with European Court of Justice and case law.
18.	In the case of Christiane Adam there was a request for a preliminary ruling to the European Court of Justice as to the meaning of “liberal professions”.  The Court held that “liberal professions” mentioned in Annex F(2) to the Sixth Directive are activities which involve a marked intellectual character, require a high level of qualification, and are usually subject to clear and strict professional regulations.  In the exercise of such an activity, the personal element is of special importance, as such exercise always involves a large measure of independence in the accomplishment of the professional activities.
19.	In considering the law it is clear that in the first instance one has to consider the activities under 9(2) if the activities do not cover the instant case then the supply falls under clause 9(1) and will be the place where the supplier has…in the absence of [a fixed establishment] ..his permanent address or usually resides.
20.	It is also clear that article 9.2(e) indent 3 covers activities.  It is less clear whether each of the activities identified at clause 9(2)(e) indent 3 are in fact “liberal professions”. However, for the purposes of this appeal Mrs Linklater submitted that Consultant, lawyer and accountant must all fall within the liberal professions.
21.	My colleague and I have considered the facts and the law and we have decided that Consultant must fall within the term “liberal profession”. The European Court of Justice has given a preliminary ruling in Christiane Adam as to the meaning of “liberal profession” and has stated that a “liberal profession” must have a marked intellectual character, require a high level qualification, and be subject to clear and strict professional regulation.
22.	We have no doubt as to the eminence of the Appellant as far as his clients are concerned. We also have no doubt that the Appellant is consulted but we are satisfied he is not a Consultant.  He is not an individual of marked intellectual character; although we have no doubt that he possesses the powers for which he has been trained over the last 30 years.  He has no high level qualification whatsoever. There is no regulatory body.  In fact under cross-examination he confirmed that he was unaware of any others in his area of work.
23.	For a Consultant to have any value at all he must be recognised within his peer group as an individual with professional knowledge and skill, who knows more about the matter in hand than they do.
24.	The Appellant has produced no evidence neither to the Respondents nor this tribunal as to how he carries out his spiritual and astrological calculations and his phrenological observations.
25.	He gave no evidence as to the content or character of the prayers he offers for his clients. 
26.	We do not doubt the genuineness of his activities but we cannot accept that he is a Consultant.
27.	As a result the exemption provided by section 8 paragraph 3 of Schedule 5 of the Value Added Tax Act 1994 does not apply and his services to his non-European clients are based in the United Kingdom and will be chargeable to VAT at the standard rate.
28.	The Commissioners made no applications for costs and we award none.

D S PORTER
CHAIRMAN

RELEASED:

MAN/03/20