20262
VAT — company formation services — whether supplies of memorandum and articles of association and related printed material to purchasers of “bespoke” companies qualify for zero-rating as separate supply — no — appeal dismissed 

MANCHESTER TRIBUNAL CENTRE

 
 	
					NATIONAL BUSINESS REGISTER PLC	Appellant

- and -

THE COMMISSIONERS FOR
				HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

Tribunal: David Demack (Chairman)

					
Sitting in public in Birmingham on 28 June 2007

Mr K M Brewer, managing director, for the Appellant 
 
James Puzey of counsel, instructed by the General Counsel and Solicitor to Her Majesty’s Revenue and Customs for the Respondents 

© CROWN COPYRIGHT 2007

DECISION

1.	The appellant company, National Business Register plc (“NBR”), appeals against the following two decisions of Her Majesty’s Commissioners for Revenue and Customs (“the Commissioners”):
(i)	a ruling by letter of 5 May 2006 that the company formation services and associated printed material it makes are those of a single standard-rated supply; and 
(ii)	an assessment to VAT of £10,613 notified in May 2006
2.	Mr K M Brewer, NBR’s managing director, who represented it, accepted the ruling in relation to NBR’s supplies of off-the-shelf ready-formed companies, but not in respect of “bespoke” companies, i.e. those formed on the specific instructions of NBR’s clients.  To the extent that his acceptance of the Commissioners’ ruling affected the tax assessment, as I understood him, he abandoned the appeal against it, but otherwise maintained it.  He maintained that in relation to bespoke companies, NBR makes multiple supplies, those of company formation services being standard-rated, and those of the associated documents being zero-rated supplies of printed materials.
3.	The facts are not in dispute, and may shortly be stated in the following way:
4.	NBR registered for VAT on 1 February 2000.  Mr Brewer is the holder of 50 per cent of its issued shares; his wife owns the remaining 50 per cent.  NBR  provides company formation services to customers, who are usually accountants, solicitors, or private individuals.  It also offers a range of other “business services” to individuals, partnerships and companies.  (Those services play no part in the appeal).  At the request of a customer wishing to use its company formation services, NBR provides either a “bespoke company” or a “ready made company” package, the former being the most popular.  Both packages are advertised on NBR’s website and in its promotional material as available for a VAT inclusive price of £125, but that price is not broken down into its component parts.   
5.	 In each case, a customer receives a company registered at Companies House.  The “company kit” provided with every package consists of:
(a)	a Certificate of Incorporation 
(b)	a record of the application and allotment of shares 
(c)	share transfer forms
(d)	debentures forms (where required)
(e)	a Register of Members and Share ledger
(f)	Companies House form 225 
(g)	register of secretary forms
(h)	director’s interest forms
(i)	a sample of the minutes of meetings 
(j)	a number of share certificates
(k)	six copies of the Memorandum of Association 
(l)	six copies of the Articles of Association 

6.	Most of the forms supplied require completion by the customer after the company has been formed or transferred, but certain initial entries on them are made by NBR.
7.	With a “bespoke company” NBR arranges for the incorporation of a new company meeting its customer’s specific requirements.  It collects from the customer the £20 fee payable to Companies House for registering the company, and correctly treats it as a disbursement.
8.	With a “ready made company” a customer receives a company with a standard Memorandum of Association containing an all-purpose objects clause and Articles of Association.  NBR will have formed the company prior to the customer’s request for a company and will have completed and lodged at Companies House all forms necessary for incorporation.  It again charges a fee of £20 to cover the registration fee it has paid to Companies House, but does not treat it as a disbursement.  
9.	With NBR’s “bespoke company” package, the customer is provided with everything necessary to register a new limited company at Companies House, and on completion of the service the customer receives an invoice in the following form:
	Limited company formation / seal		£  20.00
	Memorandum, Articles of Assoc, Co. Reg	£  81.50 
	Disbursements – Companies House		£  20.00
	Net						£121.50
	VAT						£    3.50
	Total						£125.00

NBR charges VAT only on the “limited company formation/seal” fee of £20.00.  Thus it treats the supply of the Memorandum and Articles of Association and related forms as a separate from the supply of the company, i.e. as one of printed materials qualifying for zero-rating.

10.	With the “ready made company” package, NBR transfers the two shares which will have been issued to its nominees as the original subscribers to the customer and ensures that he does everything else necessary to complete the transfer of the company to him.  On completion of the service the customer receives an invoice detailed as follows:
	Limited company formation / seal		£  17.02
	Memorandum, Articles of Assoc, Co. Reg	£  81.50 
	Disbursements – Companies House		£  20.00
	Net						£121.50
	VAT						£    6.48
	Total						£125.00
As mentioned earlier, NBR accepts that in the case of ready made companies its charge of £81.50 for the Memorandum and Articles of Association is liable to VAT.   Until now, it has charged only £17.02 for the “limited company formation / seal”, considering itself liable for VAT only on that charge plus the fee of £20 paid to Companies House, i.e. on a total of £37.02.  Again, NBR treated the supply of the Memorandum and Articles of Association as a separate supply of zero-rated printed materials.
11.	The case law on which the parties rely for their respective positions is to be found in the judgment of the Court of Justice of the European Communities in Card Protection Plan Limited v Commissioners of Customs and Excise [1999] STC 271 and the tribunal decision in Company Registrations Online Limited v Commissioners for Revenue and Customs (2006) Decision No. 19461.  
12.	In Card Protection Plan, the European Court explained that, in deciding whether a transaction which comprises several elements is to be regarded as a single supply or as two or more distinct supplies to be assessed separately, regard must first be had to all the circumstances in which that transaction takes place.  In its judgment, the court went on to hold:
“29.	In this respect, taking into account, first, that it follows from art 2(1) of the Sixth Directive that every supply of a service must normally be regarded as distinct and independent and, second, that a supply which comprises a single service from an economic point of view should not be artificially split, so as not to distort the functioning of the VAT system, the essential features of the transaction must be ascertained in order to determine whether the taxable person is supplying the customer, being a typical consumer, with several distinct principal services or with a single service.

30. 	There is a single supply in particular in cases where one or more elements are to be regarded as constituting the principal service, whilst one or more elements are to be regarded, by contrast, as ancillary services which share the tax treatment of the principal service. A service must be regarded as ancillary to a principal service if it does not constitute for customers an aim in itself, but a means of better enjoying the principal service supplied (see Customs and Excise Comrs v Madgett and Baldwin (trading as Howden Court Hotel) (Joined cases C-308/96 and C-94/97) [1998] STC 1189 at 1206, para 24)”

13.	In Company Registrations Online, the tribunal was required to decide whether, in making supplies of company formation services, the company was making a separate zero-rated supply of the Memorandum and Articles of Association.  At paragraph 19 of its decision, the tribunal, chaired by Lady Mitting, held that:
“The provision of the Memorandum and Articles was but one element in the supply and was in our view an ancillary element for the enjoyment of the principal service supplied (Card Protection Plan).  The supply of the service is a standard rated supply and the ancillary supply of the Memorandum and Articles should also therefore be standard-rated.”
14.	Mr Brewer submitted that in the instant case the Commissioners wrongly applied the judgment in Card Protection Plan.  Every bespoke company was different from every other one:  it was thus incorrect to say that supplying the Memorandum and Articles of Association and other printed material provided to such a company was part of a package which should not be broken up.  In Company Registrations Online every customer received exactly the same supply.  NBR’s customers receiving “bespoke” companies each received a supply tailored to its own needs, and whose content was unique.  The fact that NBR charged a single price for a bespoke company was not decisive; each case must be decided on its own facts.  Mr Brewer submitted that for those reasons the supplies made by Company Registrations Online should be distinguished from those in the instant case.
15.	In contrast, Mr Puzey, counsel for the Commissioners, submitted that the instant case was on all fours with that of Company Registrations Online: the application of the Card Protection Plan principles resulted in the clear conclusion that there was but one supply – that of company formation services.  The supply of printed material was simply ancillary to the main supply, and shared the same tax treatment: that was clearly the result of the application of paragraph 30 of the Card Protection Plan judgment to the facts of the instant case.  Further, NBR presented the material as one package, and whilst the content of the off-the-shelf and bespoke packages might be different, that made no difference to the result: the customer was still purchasing a company.
16.	Mr Puzey made no mention of the method of charging in his submissions, but as I do not consider it to be determinative either way, perhaps that matters not: it is but one factor to be considered in the analysis of the transaction.  
17.	Taking account of all the factors above mentioned, I hold that NBR makes one single supply: that of a company formation service.  It provides its customers with a company ready for operation.  Whilst the nature of the company and the form of materials depend on the choice made by the customer, whichever form of package it takes, it is provided with six copies of both the Memorandum and Articles of Association and other documents.  The printed material is an integral part of the standard-rated formation service package.  It is thus ancillary to the principal service as not constituting an aim in itself but rather a means of better enjoying the company formation service.  Consequently, in my judgment, it must be included in that package and attract the same VAT liability.  In so holding, I adopt the submissions of Mr Puzey in their entirety.
18.	I dismiss the appeal against the decision letter, but since Mr Puzey made no application for costs, I make no direction in that behalf.  
19.	Mr Brewer protested strongly that the assessment under appeal related in part to a period before the Commissioners made the decision under appeal.  I accept that that was the case, but as the assessment was made timeously, the fact is of no assistance to NBR.  I confirm the assessment in its full amount.

DAVID DEMACK
CHAIRMAN
Release Date: 20 July 2007
MAN/06/0778