D Nuttall UK Limited v The Commissioners for HMRC

Section 24(1)(a) of the VATA defines VAT input tax in relation to a taxable person as including “VAT on the supply to him of any goods or services”;

Section 25(2) of the VATA entitles a taxable person to a credit in each VAT period “for so much of his input tax as is allowable under section 26”;

Section 26 of the VATA provides that VAT input tax is allowable to the extent that it is attributable to “supplies made or to be made by the taxable person in the course or furtherance of its business”; and

Section 25(3) of the VATA provides that, if no VAT output tax is due in respect of the VAT period or if the amount of the VAT output tax that is due in respect of that period is less than the amount of the VAT input tax for which credit is available, then the Respondents are required to pay to the taxable person the amount of the VAT input tax credit or the amount by which the VAT input tax credit exceeded the VAT output tax (as the case may be).

the PVD had direct effect in UK law until the end of the Brexit implementation period on 31 December 2020 – see the European Communities Act 1972 and Section 1A of the European Union (Withdrawal) Act 2018 (the “EUWA 2018”); and

after 31 December 2020, the PVD ceased to have direct effect but the provisions of UK law specified in paragraph 17 above, as “retained EU law”, were required to be interpreted in conformity with the PVD – see Sections 2 and 6 of the EUWA.

in identifying whether a person has received a supply, it is necessary first to consider the rights and obligations to which the arrangement in which the supply has been made gives rise as a matter of contract – in other words, was there a contractual obligation on the part of the supplier to supply the goods or services in question to that person – and then to consider whether, taking account of all the circumstances, the contractual analysis reflects the economic and commercial reality of the arrangement – see AirTours Holidays v The Commissioners for Her Majesty’s Revenue and Customs [2016] 4 All ER 1 (“AirTours”) at paragraphs [20], [21], [48] and [49], WHA v The Commissioners for Her Majesty’s Revenue and Customs [2013] UKSC 24 (“WHA”) at paragraphs [27] to [39] and The Commissioners for Her Majesty’s Revenue and Customs v Newey (trading as Ocean Finance)(Case C-653/11) (“Newey”) at paragraphs [40] to [45];

the labels which the parties to an arrangement have used to describe their arrangement “cannot be conclusive and may often be of little weight” – see Secret Hotels2 Ltd (formerly Med Hotels Ltd) v The Commissioners for Her Majesty’s Revenue and Customs [2014] UKSC 16 (“Secret Hotels2”) at paragraph [32] and, although contractual terms constitute a factor to be taken into account, they sometimes do not wholly reflect the economic and commercial reality of the transactions – see Newey at paragraph [52]) and Airline Placement Ltd v The Commissioners for His Majesty’s Revenue and Customs [2025] UKFTT 894 at paragraph [87];

a clear example of circumstances where the contractual relationship is not determinative is where “[the] contractual terms constitute a purely artificial arrangement which does not correspond with the economic and commercial reality of the transactions” – see AirTours at paragraph [49], referring to Newey at paragraph [45];

however, purely artificial arrangements are just one example of circumstances where the contractual relationship does not reflect the economic and commercial reality of the arrangement. They are not the only example of such circumstances – see U-Drive Limited v The Commissioners for Her Majesty’s Revenue and Customs [2017] UKUT 112 (TCC) (“U-Drive”) at paragraph [36];

in each case, regard must be had to all the circumstances in which the transaction or combination of transactions takes place – see U-Drive at paragraphs [32(4)] and [37] – and what is needed is a careful and sensitive analysis having regard to the economic and commercial reality of the transaction taken as a whole – see AirTours at paragraphs [44] to [46], citing the judgments of Lord Reed and Lord Hope in The Commissioners for Her Majesty’s Revenue and Customs v Aimia Coalition Loyalty UK Ltd [2013] UKSC 15 sub nom The Commissioners for Her Majesty’s Revenue and Customs v Loyalty Management UK Ltd [2013] STC 784 at paragraphs [66], [67] and [110] (“Aimia”);

it follows that each case is required to be determined in accordance with its own specific facts – see AirTours at paragraph [59], Aimia at paragraph [68] and U-Drive at paragraph [45];

the mere fact that a person has paid the consideration for a supply does not mean that that that person has received the supply. The payer may simply have paid what has been described in various cases as “third party consideration” for a supply made to someone else – for example, because it is discharging an obligation owed to the recipient of the consideration or to a third party – see Aimia at paragraph [67], WHA at paragraphs [56] to [60] and U-Drive at paragraph [44]; and

in analysing the relevant arrangement, the principle of fiscal neutrality should be borne in mind although that is not a fundamental principle or a rule of primary law but merely a principle of interpretation to be applied concurrently with, and as a limitation on, the strict interpretation of exemptions in the VAT legislation – see AirTours at paragraphs [52] and [53].

fuel had been provided to the holder of a fuel card (A) on the basis that another person – the lessor in the case of Auto Lease Holland and the parent company in the case of Vega – (B):

the CJEU declined to analyse the arrangement as involving a supply of fuel by the fuel supplier to B followed by an onward supply of fuel by B to A. Instead, it held that the supply of fuel had been made by the fuel supplier to A and that the only supply made by B to A had been a supply of credit – see Auto Lease Holland at paragraphs [31] to [37] and Vega at paragraphs [23] to [51].

a written contract between the Appellant and ROBO dated 3 January 2020 (the “ROBO Contract”); and

a written contract between the Appellant and AS24 Fuel Card Limited (“AS24”) dated 16 January 2016 pursuant to which all of the Disputed Fuel Supplies were made (the “AS24 Contract”).

had been intended to set out the terms of the pre-existing oral agreement between the parties to the contract;

had been drafted in Romanian by Ms Trusca –whose first language is Romanian – without the assistance of legal professional advice, with the English version of the contract’s being created by translating the Romanian version into English using Google Translate. Consequently, the contract was poorly drafted and the English version of the contract was not entirely reliable; and

did not include a number of significant terms governing the relationship between the parties – most notably, the quantum of the fixed price per kilometre which the Appellant was required to pay to ROBO by way of the fixed payments.

there appeared to be no meaningful dispute between the parties as to the meaning of the language in the contract; and

the deficiencies in the drafting of the contract referred to in paragraph 27 above meant that, in any event, the witness evidence was bound to play a more significant role than the provisions set out in the contract in ascertaining the terms of the agreement between the parties.

the object of the contract was to deal with “trips for the transport of goods in different countries of the European Community” – see Article 1(1);

the Appellant would “pay for all costs and charges associated with the vehicle including but not limited to: diesel, repairs, parts, maintenance, tolls, road tax etc.” – see Article 1(1);

the obligations of ROBO were:

see Article 4(1); and

the obligations of the Appellant were to “pay the transports in less than 30 days, to pay the diesel costs by recharge and pay the drivers” – see Article 4(2).

the “Customer” was the Appellant, as the person who had executed the contract – see Clauses 1.12 and 2;

a “User” was the Customer “and any person to whom Customer has entrusted the Card or authorised its use” – see Clause 1.32;

within a reasonable time after the formation of the contract, AS24 would post the relevant number of cards and the related PINs to the Customer and, “[for] the avoidance of doubt, a Card number is referable to a particular Customer, not to a vehicle, User or otherwise” – see Clause 3.2;

the Customer could issue a card to one or more Users “provided Customer remains exclusively responsible for the use and safe-keeping of that Card and its PIN and all Network Services received by using it” – see Clause 3.5;

the Customer undertook that it would procure that all cards were kept in a safe place separate from their related PINs and take all necessary steps to prevent any unauthorised person from learning any PIN and the Customer agreed that it would be responsible for any transaction made with a card – see Clause 3.7;

the Customer was obliged to notify AS24 of a lost or stolen card so that it could be stopped and the Customer would remain liable for the use of a stopped card in certain circumstances – see Clauses 5.2 and 5.3;

AS24 would invoice the Customer periodically and the Customer would pay all invoices within 15 days – see Clauses 7 and 8;

any claims in respect of defective fuel supplies had to be referred to AS24 within seven days of supply – see Clause 9; and

the Customer could not “assign, transfer, charge or otherwise encumber, create any trust over or deal in any manner with the Contract or any right, benefit or interest under it nor transfer, novate (or sub-contract any of its obligations under it” [sic] – see Clause 13.

the Appellant contracted for repairs and maintenance of ROBO’s trucks in the same way as it contracted for repairs and maintenance of the Appellant’s trailers; and

in some cases, the Appellant acquired parts (such as tyres) to retain in its own warehouse as stock to use in repairing and maintaining ROBO’s trucks and the vehicles of the Appellant’s sub-contractors (as to which, see below).

having previously worked for another Romanian company owned by Mr Nuttall, she had formed ROBO in 2017. ROBO started carrying on its business in 2018 using trucks which it acquired from the Appellant;

ROBO used its trucks to provide transport services to the Appellant;

ROBO had in the past had a small number of other clients as well. On the rare occasions when a truck was used for a client other than the Appellant, ROBO did not compensate the Appellant for the fuel in the tank when the truck started to be used for the other client;

Mr Nuttall would organise all the transport orders and handle all of the logistics associated with the deliveries and the trucks. Only he would decide where the drivers would refuel and how much fuel they could purchase with the AS24 cards and, except in cases where the work was insured and she had to co-ordinate the work with the insurer, it was up to him to decide when repairs and maintenance were carried out and the identity of the supplier;

during the Relevant Periods, apart from the one or two drivers that ROBO provided to drive the trucks – for whose employment costs ROBO was reimbursed by the Appellant – and liaising with the insurers as described in paragraph 36(4) above, ROBO’s only role was to pay the excluded costs – the insurance, the road tax and the goods vehicle operator’s licensing fees – in respect of the trucks and receive the fixed payments;

she had no idea how often Mr Nuttall spoke to the drivers or where the trucks were from time to time although, in theory, she could always discover where they were located at any time by using the GPS tracking system on the trucks;

prior to Brexit, the Appellant paid for all of the fuel directly. Following Brexit, this changed so far as fuel in the EU was concerned. Instead of being paid directly by the Appellant, the cost of that fuel was paid by ROBO and reimbursed by the Appellant. However, no change was made so far as the cost of fuel in the UK was concerned. That cost continued to be borne directly by the Appellant;

the fixed payments which the Appellant made to ROBO were increased following Brexit. This was because of increased insurance and road tax costs suffered by ROBO and not because of the change described in paragraph 36(7) above in the way that the cost of fuel in the EU was discharged; and

sometimes when a truck was damaged or at the end of its life, ROBO would sell the truck to the Appellant.

the Appellant’s business involved more than freight-forwarding. Its services included loading, unloading, storing and transporting goods, as well as arranging for customs and other paperwork. In addition, the Appellant sometimes used the stock of spare parts described in paragraph 34(2) above and paragraph 37(13) below to provide repairs and maintenance services to third parties;

the Appellant did not own any of the trucks which it used to transport its trailers. Instead, Mr Nuttall said in his witness statement that the Appellant “[contracted] with other companies with trucks to provide ‘traction’ services to move the trailers, sometimes using drivers hired by [the Appellant] and sometimes with the traction company’s own drivers”. During the Relevant Periods, ROBO was the only traction company which the Appellant used for this purpose. The trucks owned by ROBO and used to provide the traction services had previously been owned by the Appellant. They were sold to ROBO in 2018 when the Appellant ceased to hold its own goods vehicle operator’s licence;

there were two reasons why the Appellant chose not to own its own trucks but instead to contract for traction services – one was that, as mentioned in paragraph 37(2) above, the Appellant had ceased to hold a goods vehicle operator’s licence in 2018 and the other was that the arrangement provided the Appellant with greater flexibility and cost efficiency;

it was his understanding that the agreement which the Appellant had reached with ROBO for the provision of traction services meant that the Appellant did not need to have its own goods vehicle operator’s licence. Instead, it could rely on the fact that ROBO had such a licence;

ROBO’s trucks were never used for any purpose apart from the Appellant’s business. They were always engaged in carrying goods for the Appellant and there was never an occasion when the trucks went back to ROBO so that ROBO could use them for other clients. Ms Trusca had been wrong to suggest that they had. On those occasions when, following Brexit, the trucks were used by the Appellant to carry goods for one of the Appellant’s Romanian clients and it was thought to be more efficient for ROBO (instead of the Appellant) to bill the client in the first instance, ROBO had effectively done so on behalf of the Appellant and had accounted to the Appellant for the proceeds received from the client. He thought that Ms Trusca had confused those situations with the use of the truck by ROBO for clients other than the Appellant;

the agreement which he had reached with Ms Trusca in relation to the traction services provided by ROBO was that:

subject to the point mentioned in paragraph 37(10) below, the Appellant met all of the fuel costs directly under the AS24 Contract;

as the “Customer” under the AS24 Contract, the Appellant had access to cards entitling the holder to obtain fuel from AS24 and AS24’s partners. The Appellant provided each of the drivers with a card which the relevant driver could then use to fill up the trucks. However, the way in which this worked was that the Appellant would allocate the card to a particular truck as opposed to a particular driver (so that each AS24 card would remain with the truck no matter who was driving it, rather than being retained by the driver as he changed trucks);

the Appellant exercised stringent control over the use of the cards and could put a stop on any card at any time. Drivers knew the parameters which applied to their use of the cards – for example, the need to purchase fuel in mainland Europe wherever possible because the cost of that fuel was cheaper than in the UK and the Appellant’s preferred AS24 and AS24 partner stations both in the UK and in mainland Europe. Drivers knew that, subject to exceptional circumstances, they could not acquire more than 150 litres of fuel in the UK. In addition, the Appellant closely monitored the use of the cards so that it was aware of the ongoing fuel costs at all times. When purchasing fuel, the relevant driver would either have to enter the PIN before refuelling (at an unmanned station) or hand the card over to a member of staff at the station before refuelling for authorisation. AS24 would bill the Appellant periodically for the fuel purchased with the cards;

one exception to the above – which was not really relevant to the Disputed Supplies – concerned supplies of fuel in the EU following Brexit. Since the Appellant was no longer able to benefit from a refund of the fuel duty associated with purchases of fuel in the EU after Brexit, that fuel was purchased by ROBO and then the Appellant reimbursed ROBO;

subject to the point which is mentioned in paragraph 37(12) below, the Appellant also arranged, and directly met the costs of, the repairs and maintenance of the trucks. It held accounts with a number of suppliers and had an ongoing relationship with various others. In that way, it was able to obtain discounts and to manage the costs most efficiently. When a truck needed repairs or maintenance, the driver would report the issue to the Appellant and the Appellant would then direct when, where and how the work of repairs or maintenance would be carried out. In some cases, the work would be carried out at the Appellant’s premises because the Appellant had access to parts and expertise (including its own employees). In order to meet the costs of repairing and maintaining the trucks more efficiently, the Appellant maintained a stock of spare parts (such as tyres, which the Appellant bought in bulk) at its warehouse which it then used to fit to the trucks as and when required;

one exception to the above was where the repairs or maintenance work was to be covered by insurance. In that case, the cost of the repairs or maintenance would be met by the insurer and ROBO would deal directly with the insurer in relation to the work as ROBO was the insured party;

the Appellant sometimes used its stock of spare parts to provide repairs and maintenance services to third parties, such as its sub-contractors;

during the Relevant Periods, nearly all of the drivers were the Appellant’s own employees and the Appellant remunerated them directly. However, some of the drivers – no more than two at any time during the Relevant Periods – were employed by ROBO and, in those cases, the Appellant reimbursed ROBO for the associated employment costs; and

the consequence of the above arrangements was that the Appellant bore all of the risks, and benefited from all of the rewards, associated with running the trucks. Come what may, the Appellant continued to make fixed payments at the same fixed rate per kilometre to ROBO for ROBO’s services and that rate did not change if the costs of running the trucks increased or reduced.

he was a driver employed by the Appellant who had driven ROBO’s trucks for around eight years;

he would use the Appellant’s AS24 card to purchase fuel. Generally, those purchases were pre-approved by Mr Nuttall, who was able to access the special card price for the fuel on-line, although there were occasions outside working hours when he would do so without prior approval because he knew from experience Mr Nuttall’s parameters. For example, he knew that Mr Nuttall wanted purchases of fuel to be made in continental Europe as opposed to the UK so far as possible and he also knew which stations run by AS24 or its partners offered the most attractive rates; and

if he thought that a truck needed repairs or maintenance, then he would call Mr Nuttall for instructions as to where and when the repairs or maintenance were to be carried out.

it seemed to us that Mr Nuttall had at all times effective control over all aspects of the arrangement and that Ms Trusca’s involvement in the arrangement was somewhat peripheral;

Mr Nuttall provided us with a plausible explanation for Ms Trusca’s confusion on the point – see paragraph 37(5) above; and

the fact that the trucks were at all times solely carrying out deliveries for the Appellant was consistent with the fact that:

ROBO was at all times the owner of the trucks; and

ROBO was contractually obliged to provide the Appellant with transport services, for which it required, in addition to drivers, both fuel and properly repaired and maintained trucks,

as a matter of contract, ROBO had agreed to provide the Appellant with transport services and, as consideration for the transport services, the Appellant had agreed both to make the fixed payments to ROBO and to meet all of the costs associated with the running of the trucks (including the fuel, the repairs and maintenance and the drivers) but not the excluded costs; and

that contractual analysis was entirely consistent with the economic and commercial reality of the arrangement in that it was ROBO which needed the fuel and the repairs and maintenance in order to provide the transport services to the Appellant whilst the Appellant, as consideration for those transport services, had to make the fixed payments to ROBO and meet the costs associated with running the trucks apart from the excluded costs. The fact that the Appellant did not have a goods vehicle operator’s licence itself and was therefore precluded from operating the trucks itself demonstrated that the trucks must have been operated by ROBO and therefore that what ROBO had supplied to the Appellant must have been transport services and not simply access to the trucks.

it was the drivers of the trucks who used the AS24 cards and those drivers were the people carrying out the transport services for ROBO;

the AS24 cards were allocated by the Appellant to the trucks which carried out the transport services for ROBO (in that each AS24 card would remain with the truck no matter who was driving it, rather than being retained by a driver as he changed trucks); and

the repairs and maintenance were carried out on the trucks and it was the trucks which carried out the transport services for ROBO.

by examining the rights and obligations to which the arrangement gave rise as a matter of contract; and then

by considering whether, on a careful and sensitive analysis of the specific facts in this case, that contractual analysis accords with the economic and commercial reality of the arrangement.

ROBO would make supplies of transport services to the Appellant, as opposed to simply making its trucks available to the Appellant; and

in return, the Appellant would make the fixed payments to ROBO and meet all of the costs associated with the running of the trucks (including the fuel, the repairs and maintenance and the drivers) but not the excluded costs.

it did not set out a number of significant terms of the parties’ agreement – most notably, the basis on which the quantum of the fixed payments which the Appellant had agreed to pay to ROBO was to be determined. Accordingly, it is reasonable to conclude that the parties did not agree or intend that the ROBO Contract contained all the terms of their agreement; and

both Mr Nuttall and Ms Trusca testified that at least two of the terms of the ROBO Contract were inconsistent with what the parties had actually agreed when the ROBO Contract was executed. For example:

the ROBO Contract provided in Article 1(1) that ROBO’s obligation was to provide “trips for transport” and referred in Article 4(2.1) to the fixed payments as “the transports”. In both cases, the language used was more consistent with the proposition that what ROBO had agreed to provide to the Appellant was transport services than the proposition that what ROBO had agreed to provide to the Appellant was simply the use of its trucks;

in Article 4(1) of the ROBO Contract, ROBO agreed promptly to observe the orders for loading, unloading and handling given to it by the Appellant and to observe “the operational procedures, whether established by usage or agreed upon”. Again, that is more consistent with the proposition that what ROBO had agreed to provide to the Appellant was transport services than the proposition that what ROBO had agreed to provide to the Appellant was simply the use of its trucks;

bearing in mind the points made in paragraphs 59 to 61 above about the extent to which oral evidence is admissible in determining the terms of a contract which is in written form, the language in the ROBO Contract is entirely consistent with the testimony of Mr Nuttall and Ms Trusca, the individuals who entered into the contract on behalf of the Appellant and ROBO. Mr Nuttall said repeatedly, in both his witness statement and his oral testimony, that the agreement between the parties was that ROBO would provide “traction services” to the Appellant. Ms Trusca’s testimony was to the same effect – she said in her witness statement that ROBO used its trucks to provide “transport services” to the Appellant and, at the hearing, she confirmed that ROBO was not simply making its trucks available to the Appellant but instead using its own goods vehicle operator’s licence to provide transport services to the Appellant;

the invoices provided by ROBO to the Appellant in respect of the Relevant Periods specified that the fixed payments set out in the invoices were for “Transport services” provided by ROBO to the Appellant; and

leaving aside the economic and commercial reality of the arrangement into which the Appellant and ROBO entered – which we address in the next section of this decision – and what impact that economic and commercial reality might have meant in terms of the Appellant’s not being in breach of the goods vehicle operator’s licensing system – which is not part of our remit – it is clear from the evidence with which we were presented that, at the time when they entered into the contract on behalf of their respective companies, both Mr Nuttall and Ms Trusca:

Consequently, the purpose of the parties in entering into the contract was clearly that ROBO would provide transport services to the Appellant and not merely make its trucks available to the Appellant, so that the Appellant could take advantage of ROBO’s goods vehicle operator’s licence.

ROBO, and ROBO alone, operated the trucks throughout those periods and received the supplies of fuel and repairs and maintenance that were necessary in order for the trucks to conduct those operations;

ROBO’s operation of the trucks meant that it was providing transport services to the Appellant; and

the discharge by the Appellant of all of the costs associated with operating the trucks – apart from the excluded costs – was simply part of the consideration given by the Appellant to ROBO in return for the transport services provided to it by ROBO.

first, it was Mr Nuttall, and not Ms Trusca, who made all the decisions in relation to the operation of the trucks and the journeys which they made. He was the person who decided when, where and how the fuel for the vehicles would be purchased and when, where and how the vehicles would be repaired and maintained;

it was to Mr Nuttall and not Ms Trusca that the drivers, almost all of whom were the Appellant’s employees, looked for instructions in relation to those matters;

Mr Nuttall and his colleagues at the Appellant’s head office knew exactly where the trucks were from time to time. The same was not true of Ms Trusca. Whilst Ms Trusca would have been able to discover the location of the trucks at a particular time using GPS if she had wanted to, that was not something that she was doing because, in reality, ROBO was not, in fact, providing transport services. Instead, ROBO was simply making its trucks available to the Appellant (in return for the fixed payments from the Appellant) so that the Appellant could use the trucks in the course of its business;

when it came to repairs and maintenance, the Appellant contracted for repairs and maintenance of ROBO’s trucks in the same way as it contracted for repairs and maintenance of the Appellant’s trailers; and

all of the trucks owned by ROBO were purchased by ROBO from the Appellant at the start of the arrangement and, when some of the trucks were damaged or reached the end of their useful lives, they were transferred by ROBO to the Appellant.

did not own the trucks;

was not responsible for the excluded costs; and

was obliged to make the fixed payments to ROBO in return for obtaining access to the trucks.

was party to the AS24 Contract and the repairs and maintenance contracts;

was in control of when, where and how the relevant goods and services were supplied;

bore the costs of those supplies; and

benefited from those supplies because it needed the goods and services so provided in order to carry on its business of providing freight services.