Similar to the previous cases; EGN and RCI, this case was concerned with the place of supply of services. More specifically it considered whether services supplied by the taxpayer to its parent company were consultancy services within the scope of para 3 sch 5 to the VATA 1994 and supplied in Japan or whether the service were more akin to managerial services with the consequence that they were supplied in the country the supplier had its establishment.

By way of background, the taxpayer Sumitomo was a subsidiary of Sumitomo Mitsui Banking Corporation (SMBC) which was based in Tokyo. SMBC divided up its activities within a management structure consisting of eleven functional departments which in turn were broken into sections. Of relevance to this case was the Planning Dept which comprised five sections. Each of the eleven departments was headed by a General Manager who reported to the CEO. The General Manager of the Planning Department deputised for the Chief Executive Office. The case concerned the services provided by the CEO, the General Manager and the Planning Group to SMBC in Tokyo, pursuant to a service level agreement between Sumitomo and SMBC. The services provided by Sumitomo to SMBC which formed the dispute of the Appeal were described in the Service Level Agreement as providing management and corporate services.

The taxpayer contended that its supplies of the CEO, General Manager of the Planning Dept and the Planning Group to SMBC were services of consultants and or consultancy bureaux. As consultancy services, they were supplied in Japan and as such outside the scope of UK VAT. The taxpayer submitted that consultancy was not restricted to the giving of advice and referred the Advocate General's opinion in the Linthorst and von Hoffman cases where it was acknowledged that there was a myriad of possible forms of consultancy work.

HMRC claimed that the services were of a managerial nature concerned with the day to day and longer term management of the SMBC organisation. As managerial services, they were supplied in the UK and subject to UK VAT. Further HMRC contended that the supplies were an integral part of the ongoing management of the Appellant's business and went far beyond the nature of supplies made by consultants. HMRC pointed to the Advocate General's opinion in the Linthorst case where he said that some advisory or consultancy work was not sufficient to bring it within Article 9(2)(e).

The Tribunal interpreted the Advocate General's opinion about the myriad of possible forms of modern consultancy work (Linthorst and von Hoffman) as consultants acting in a wide range of areas rather than their services being broad in nature. The Tribunal agreed with HMRC counsel's construction of the European Court's use of advisory or consultancy aspects (Linthorst case) where the consultancy services had to be the principal and habitual activity to trigger article 9(2)(e) rather than a statement about the breadth of consultancy work.

The Tribunal found that

• With regard to the HMRC counsels submission, the services provided by the Chief Executive Officer and the General Manager were ones of leadership and providing strategic direction which were ongoing and an integral part of SMBC decision making processes. The services provided were not the services of consultants or consultancy bureaux within the meaning of para 3 sch 5 to the VATA 1994.
• The services carried out by the Planning Group were ongoing and integral to the management control processes for SMBC. The services were not the services of consultants or consultancy bureaux within the meaning of paragraph 3 schedule 5 of the VAT Act 1994.

The parties agreed that the taxpayer belonged in the UK and thus the place of the supply of services was the UK. Therefore the appeal was dismissed.

The decision is available at http://www.bailii.org/cgi-bin/markup.cgi?doc=/uk/cases/UKFTT/TC/2009/TC00089.html&query=Sumitomo&method=boolean