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Finmeccanica Global Services v HMRC

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In Finmeccanica Global Services v HMRC [2016] EWCA Civ 1105 (17 November 2016), the Court of Appeal found that although services provided at a Farnborough air show enclosure involved an element of promotion, they did not constitute ‘advertising services’, so that the place of supply of the services was the UK.

Finmeccanica Global Services (FGS), part of a group of mainly Italian companies, is a supplier of aeronautical equipment. It sets up displays to promote its products at major events, including the Farnborough air show. The Farnborough air show provides space and an opportunity for aircraft and aerospace manufacturers to showcase their products; and provides meeting rooms and hospitality for would-be customers, the press and other selected invitees. At most, a negligible part of the FGS enclosure was open to the general public.

The FGS enclosure cost was about €14m in 2010 and FGS was responsible for arranging it. FGS invoiced the other companies of the group for its services. The issue was whether the supplies by FGS were made in the UK, as UK VAT would not be recoverable under the Refund Directive (Council Directive 2008/91EC.

The Court of Appeal noted that although the relevant provisions had changed during the period at issue, the deemed place of supply was the place where the services were supplied, or (after 1 January 2010) the place where the activities were carried out. However, there was an exception to the general rule for ‘cultural, artistic, sporting, scientific, educational, entertainment or similar activities’ or ‘advertising services’, contained in the Sixth Directive Art 9(2)(c) and 9(2)(e) (replaced by the Principal VAT Directive Art 53 and 59(b)); the issue was whether this exception applied.

The Court of Appeal observed that the only relevant services were those supplied out of or in connection with the FGS enclosure, and not the Farnborough air show as a whole. It also noted that the categories of Art 9 were mutually exclusive and that ‘the essential purpose of the supplies must be identified’. Although promotional, the activities of FGS were a specific event; FGS provided bespoke services. Additionally, applying Commission v France (Case C-68/92), ‘the further one moves away from conventional advertising as such, the more marginal the case may be for treating the supplies as falling within Art 9(2)(e)’.

In the court’s view, applying Inter-Mark (Case C-530/09), the services provided by FGS were ancillary to the group’s primary activity.

Read the decision.

Why it matters: The Court of Appeal considered that: ‘Although the supplies can be regarded as composite in the sense that an undoubted function of the enclosure they created can at one level be regarded as the advertising or promotion of the existence or qualities of the group products, to treat that purpose as defining the essential characteristics of what took place would be to elevate the general over the specific and to ignore what actually took place.’

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