© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
Q5. Agents
EXISTENCE OF AGENCY​
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Contract of agency ​
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- There must be contract between agent and principal granting the agency
"[52] As regards the first of those conditions, which is the one specifically mentioned by the referring court, it must be observed that the VAT Directive does not, admittedly, provide in what form, written or oral, the agency must be given. However, since Article 14(2)(c) of that directive expressly uses the term ‘contract’ and Article 28 of that directive states that the taxable person must act ‘on behalf of another person’, the Court concludes that there must be an agreement between the commission agent and the principal for the purpose of granting the agency concerned." (ITH Comercial C-734/19)
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- No agency where T set prices and bore risk of bad debts
"[50] Weighting up all of the evidence, we find that neither AAC nor VTL were acting as agents. The companies clearly dealt with the cards as principal, buying and invoicing customers in their own names. They were able to set their own prices, albeit constrained by what the market would bear. The providers did not know the prices at which the cards were sold. The companies bore the risk of bad debts. Mr Javaid's evidence was that the companies made a profit on the sale of cards purchased, in addition to the amounts earned from the sale of the extra cards provided to them. None of this is consistent with an agency arrangement." (AA Com Limited v. HMRC [2025] UKFTT 1601 (TC), Judge Fairpo)
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TAXPAYER RECEIVING SUPPLIES AS AGENT
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- Can only apply where the goods or services provided by agent are identical to those received
"[51] It follows that two conditions must be satisfied in order for those provisions to be applicable: first, that there is an agency in performance of which the commission agent acts, on behalf of the principal, in the supply of goods and/or services and, second, that the supplies of goods and/or services acquired by the commission agent and the supplies of goods and/or services sold or transferred to the principal are identical.
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[54] As regards the second condition, relating to the identical nature of the transactions at issue, it suffices to state that both Article 14(2)(c) and Article 28 of the VAT Directive provide that the goods and/or services supplied to the commission agent are to be transferred to the principal. Not only does this require, as is apparent from the Court’s case-law, that the transactions in question must be the same, but also that, where appropriate, the corresponding right of ownership must be transferred." ​(ITH Comercial C-734/19)
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- Must be a transfer of ownership of goods from agent to principal
"[55] In a situation such as that at issue in the main proceedings, in which a taxable person acquires goods and services in its own name and on its own behalf, and not on behalf of another person, so as to be able to supply services adapted to the particular needs of a given client, the second condition identified in paragraph 48 of the present judgment is plainly not met since there is no transfer of the right of ownership between the alleged commission agent and the alleged principal." ​(ITH Comercial C-734/19)
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- Not agent where T acquires goods/services in own name to be able to supply services adapted to needs of client
"[55] In a situation such as that at issue in the main proceedings, in which a taxable person acquires goods and services in its own name and on its own behalf, and not on behalf of another person, so as to be able to supply services adapted to the particular needs of a given client, the second condition identified in paragraph 48 of the present judgment is plainly not met since there is no transfer of the right of ownership between the alleged commission agent and the alleged principal." ​(ITH Comercial C-734/19)
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- Not agent where T carries out construction project for client
"[56] In the light of all the foregoing considerations, the answer to parts (a) to (f) of the second question is that the VAT Directive, in particular Article 28 thereof, must be interpreted as meaning that, in the absence of a contract of agency without representation, the commission agent mechanism is not applicable where a taxable person carries out a construction project in accordance with the requirements and specifications of another person who is expected to rent that building" ​(ITH Comercial C-734/19)
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Compare with (ET C-213/24)
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EFFECT OF AGENCY ​
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Acts of agent attributed to principal​
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Undisclosed agent deemed to receive and supply services​
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- Acts of agent attributed to principal​
"[24] It is apparent from the contract of mandate concluded in the main proceedings, as described by the referring court, that the contractor’s activity is limited to carrying out the tasks listed in paragraph 20 of the present judgment in the name and on behalf of its principals, who remain the selling owners of the land at issue in all deeds of sale relating thereto.
[25] As is also apparent from that contract, the remuneration for the contractor’s activities, including that covering the costs incurred from third parties for the carrying-out of the tasks necessary for the performance of those activities, is admittedly dependent on the price obtained for the sale which the contractor alone will have negotiated. The amount of that remuneration was, in fact, set as representing the difference between the actual sale price of each plot and that stipulated in that contract. Accordingly, the contractor bears the economic risk linked to the mandate and to the carrying-out of the steps for marketing the plots provided for by that mandate. In doing so, as is highlighted by the referring court, that method of remuneration reduces the economic risk borne by the principals. However, the final economic risk, which would materialise in the absence of a sale, due to the failure to perform the contract of mandate or the lack of a buyer willing to purchase the plots of land, falls solely on the principals, subject to that contract providing otherwise, which it will be for the referring court to ascertain." (ET C-213/24)
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- Two consecutive supplies deemed to take place
"[49] Next, Article 28 of the VAT Directive, which provides that where a taxable person acting in his or her own name but on behalf of another person takes part in a supply of services, he or she is to be deemed to have received and supplied those services himself or herself, creates the legal fiction of two identical supplies of services provided consecutively. Under that fiction, the operator, who takes part in the supply of services and who constitutes the commission agent, is considered to have, first, received the services in question from the operator on behalf of whom he or she acts, who constitutes the principal, before, second, himself or herself providing those services to the client (judgment of 4 May 2017, Commission v Luxembourg, C‑274/15, EU:C:2017:333, paragraphs 85 and 86 and the case-law cited)." ​(ITH Comercial C-734/19)
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Agent deemed to receive and supply goods
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- Legal fiction of two identical supplies
"[50] Finally, the Court has held that the same reasoning applies as regards the acquisition of goods pursuant to a contract under which commission is payable on purchase, under Article 14(2)(c) of the VAT Directive, which also comes under Title IV of that directive, entitled ‘Taxable transactions’. That provision thus creates the legal fiction of two identical supplies of goods made consecutively, which fall within the scope of VAT (judgment of 4 May 2017, Commission v Luxembourg, C‑274/15, EU:C:2017:333, paragraph 88)." ​(ITH Comercial C-734/19)
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