. an agreement between the applicant and the lawyers, under which the lawyers entrusted the applicant with the provision of legal services to Mr Felson and, consequently, also provided legal services to the applicant. An insurance company (NIG) has offered breakdown insurance to used car buyers. NIG insured 100% of its risks to a group company called Crystal in Gibraltar, which in turn reinsured 85% of that risk to another gibraltan company called Viscount. Viscount entered into a claims management agreement with WHA, a group company in the UK, under which WHA agreed to process all claims and entered into agreements with repairers to enable the payment of repairs in accordance with the insurance. Given the Federal Court decisions (and appeals) in the areas of the Department of Transport, ATS Pacific and Professional Administration Services, I think the approach taken in Australia with respect to GST and tripartite agreements is similar to that of the UK. This is not surprising given the similarities between VAT and GST. My analysis of the situation is therefore that the Tolsma/Redrow/Aimia “follow payment obligation” rule is the standard rule according to which the delivery of VAT follows contracts, and this rule applies in tripartite situations, unless the economic reality is contrary to the contractual situation. This paper examines a number of authorities in the United Kingdom and Australia dealing with tripartite agreements and seeks to make a series of general proposals that can be applied when considering tripartite agreements under the GST Act. While caution should be exercised with regard to the reference to foreign authorities in tax matters, it would appear that the Bundesgerichtshof was guided by a series of decisions of the higher courts of the United Kingdom and that it accepted a number of proposals in line with those decisions.
A review by the UK authorities highlights the difficulties in applying VAT to tripartite agreements. Instead of giving a historical overview of these authorities, I found it instructive to look at the British experience through the eyes of the First Tier Tribunal in the recent decision in Adecco UK Ltd v Revenue & Customs [2015] UKFTT 600. [4] A key issue in analyzing a transaction is whether there is a delivery, a compound delivery, or multiple deliveries. Another critical point is who made the delivery to and who is eligible for a pre-tax credit. Characterising a tripartite turnover and whether upstream credit can be claimed can be difficult to identify and to whom it is provided. The ATO`s interpretation of tripartite agreements is addressed to the treatment of the concept of “making available”. A distinction is made between the “supply” of a good or service and the “supply” of a good or service. The characterisation of a supply takes into account all the circumstances of the turnover in order to determine its essential nature. The ATO considers that, in situations where the contractual flow of a supply is granted to an undertaking, but the actual flow of the supply to another undertaking, only the undertaking with a contractual flow is entitled to the input VAT credit. It should be remembered that each case depends on its own facts and that these proposals constitute only a high-level road map for approaching a tripartite agreement.
While it is true that one should not be contractually “tied up”, I think that identifying the contractual situation will generally be the best starting point and will often provide the answer. This will be an unusual case if the “practical or economic reality” of the agreement depends on the contractual position. Another problematic area is that of tripartite transactions and whether they concern more than one supply and who is eligible for the resulting input VAT credit. .
