Upper Tax Tribunal dismisses JP Morgan Chase Bank VAT appeal
The Upper Tribunal judges have kicked out US banking giant JP Morgan Chase’s appeal against HMRC’s position on taxing intra-group services.
JP Morgan Chase Bank provides infrastructure and support services to companies via various intra-group agreements throughout the global group.
This includes JP Morgan Securities plc, a UK incorporated entity used for the purposes of the markets segment of the group’s global business.
Both entities are members of the same VAT group.
This legal issues arose as whilst supplies between members of the same VAT group would normally be disregarded, JP Morgan Chase’s bought in services in order to enable it to make those intra-group supplies, bringing the situation within the scope of VAT.
This means that intra-group supplies are not disregarded in certain circumstances where an overseas member of a UK VAT group on-supplies bought in services to a UK member of a partly exempt group, unless those services would fall within the exemptions.
HMRC sought to apply VAT to the whole of the supplies made by JP Morgan Chase Bank to JP Morgan Securities.
JP Morgan Chase Bank tried to argue that it did not make a single supply of services to JP Morgan Securities under the global master services agreement.
The case went to the First-Tier Tribunal in 2023 to which Judge Brooks sided with HMRC and dismissed the appeal.
The US banking giant took the case to the Upper Tribunal, which went in front of the two judges earlier this, but they again, sided with the tax agency and dismissed the appeal.
A spokesperson for JP Morgan said: ““We are disappointed by and disagree with this judgment, and we are considering our options. During the eight-year period in dispute, JP Morgan paid over £5bn of tax in the UK through corporation tax, bank levy, VAT and surcharges.”
Commenting on the legal ruling, from Anastasia Nourescu, partner at law firm Stewarts, explained: “The decision highlights the need for inter-company agreements and invoicing arrangements to reflect operational reality, as this will directly impact the VAT treatment of services.”
“While many large corporates rely on generic intra-group documentation, this case shows that such an approach may not withstand scrutiny,” she added.
Nourescu pointed out that the Tribunal’s narrow reading of the VAT exemption for transactions in securities signals a cautious approach that will impact other financial institutions.
“An appeal to the Court of Appeal would not be surprising,” she added.