UK Tribunal undertakes journey into VAT and tripartite agreements

The recent decision of the First Tier Tribunal in  Adecco Uk Ltd v Revenue & Customs [2015] UKFTT 600 illustrates the difficulties with tripartite agreements (both here and in the UK).

The Tribunal had to decide whether the applicant was liable to pay VAT on the full charge paid by its clients for the services of non-employed temps provided to those clients or only on the element of the charge retained by it (i.e. the commission or gross profit element).

As observed by the Tribunal (at [8]), the question for the Tribunal was simple in essence. What did Adecco supply to its clients?

  • A supply of introductory services – the consideration being the commission?; or
  • A supply of the temps – the consideration being the entire fee?

The answer was not so easy.

The Tribunal ultimately found that Adecco was liable to pay VAT on the whole charge, but doing so required a decision running to some 314 paragraphs, taking the reader on a detailed journey through the minefield that is the world of tripartite supplies and a consideration of the various decisions of the UK courts and the ECJ that have considered the issue, including RedrowLoyalty ManagementBaxi Group, WHA and Airtours.

In an additional twist that only adds to the confusion surrounding VAT/GST and tripartite agreements, in coming to its conclusion the Tribunal found that it could not follow a decision of the First Tier Tribunal in 2011 that came to the contrary view on the same issue and almost identical facts.

No doubt there will be an appeal – indeed, the Tribunal effectively invited an appeal to allow a higher authority to clarify the VAT issues.

My analysis of the decision can be accessed here.

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