Hastings is a company established and operating in the UK that acted as broker for a number of insurers, including Advantage, a company established and operating in Gibraltar.
Hastings sought to recover its input VAT costs attributable to its brokerage services supplied to Advantage under specific VAT provisions which provide for input VAT recovery on costs attributable to certain insurance services (including brokerage) supplied outside the EU. However, if the supply was actually made to a fixed establishment of Advantage in the UK Hastings would not have been able to recover its input VAT as its supplies would be VAT exempt.
The question for the FTT was whether Hastings was acting as a fixed UK establishment of Advantage and supplying its services to that establishment. A fixed UK establishment requires, as a matter of law, a permanently present establishment that has the human and technical resources necessary for providing or receiving services. HMRC effectively argued that Hastings, as agent of Advantage, was a fixed UK establishment of Advantage as a result of Advantage effectively making supplies of insurance services to UK customers in the UK through Hastings.
The court determined that Hastings was not a fixed UK establishment of Advantage. The court noted that, as a general matter, questions of permanency were to be considered on their specific facts and, specifically, in order for an establishment to be sufficiently "permanent" to create a fixed UK establishment, the fixed UK establishment should be able to make/receive supplies on a stand-alone business (in particular, without reference to the main business/VAT establishment in Gibraltar). There is also a requirement for the host (Advantage) to have a degree of control over the resources of its establishment.
The case will be of interest to UK investment fund managers managing funds with offshore general partners, since HMRC have, in the past, tried to argue that the UK manager is a UK fixed establishment of the non-EU general partner, and the case should give some comfort that any such argument is unlikely to succeed in normal circumstances with properly constituted general partners.