This case concerned an appeal by Paymex Limited against decisions of HMRC that supplies made in connection with consumer Individual Voluntary Arrangements (“consumer IVAs”) are taxable supplies for VAT purposes. Paymex claimed that the supplies are exempt within both the EU legislation and the relevant domestic legislation. The First-Tier Tribunal found against HMRC and upheld the appeal of Paymex Ltd that the liability of the services of Insolvency Practitioners (IP) when conducting and supervising consumer Individual Voluntary Arrangements are exempt from VAT.

The principal submission made on behalf of Paymex Ltd was that when carrying out the IVA work there were two supplies to clients; a supply of negotiation concerning debts, and a supply of payment handling. Each of these, were separate supplies that were in themselves exempt. Alternatively, if there was a single supply, the submission was that the predominant element of that supply is negotiation, which is also exempt.

HMRC's main submission was that the supplies made were supplies of professional services, akin to supplies of legal or accountancy services, and that this was a single supply.

The Tribunal decided that the services of an IP, including both the nominee and supervisory stages, constitute a single exempt supply for VAT purposes. The Tribunal also decided that the two core elements were negotiation of debts and transactions concerning payments and were not debt collection. Although there were other elements to the service, including advice on the suitability of an IVA, overall supervision of performance of the VA and reporting to creditors, the Tribunal considered that all these aspects of the service were ancillary to the core elements of negotiation and payment handling. Accordingly, the Tribunal held that the supply was exempt as falling within article 135(1)(d) of the Principal VAT Directive.

Since it had found both core elements to be exempt, it was not necessary for the Tribunal to determine which of the supplies were dominant. However, the Tribunal stated that if it had been necessary for it to do so, it would have found negotiation to be the ‘core’ supply.

The full text of the case is published on the Tribunal's judiciary website at http://www.financeandtaxtribunals.gov.uk/Aspx/default.aspx