Who Is My Customer and What am I Selling?

January 26, 2021

Sometimes it is the most basic and fundamental questions that are the hardest to answer when it comes to VAT\GST, such as who the customer in a transaction is and what exactly is the service being provided. Normally it doesn’t tend to make too much difference – because if a shop sells something to Jack or Jill – VAT\GST applies in both cases.  However, occasionally the Courts are called on to analyse who the customer is and exactly is being sold.  The answer can make a big difference.

These issues were examined in detail in the recent UK VAT\GST Tribunal case of Mandarin Consulting Limited UKFTT 228 TC (Mandarin).  Mandarin provided career coaching services to Chinese students studying in the UK with the aim of assisting them in finding jobs in large international companies. Before 2016 contracts were made between Mandarin and students. From 2016, contracts were made directly with the parents of students who were generally resident in China or places outside the EU.  Mandarin did not account for VAT\GST on its sales for periods before and after 2016 because it took the view that it was supplying services to the parents who were located outside the EU.  In addition, Mandarin had supplied consultancy services, which is deemed to be supplied where the customer was located. Such services are outside the scope of UK VAT\GST as the customers – i.e. the parents are not located in the UK.

The UK tax authority (HMRC) took a different view and argued that Mandarin was making supplies of physical educational services.  The supply of educational services which occur in the UK is always subject to UK VAT\GST, regardless of where the customer is located.  On this basis HMRC sought to argue that VAT\GST applied.   A secondary argument was that the supplies were actually made to UK residents – the students and therefore UK VAT\GST was due because the customers were in the UK.

The VAT\GST Tribunal considered the type of service provided by Mandarin and concluded that it was not an ‘educational’ service but one of a ‘consulting’ nature.  While elements of career coaching may be taught in Universities of Colleges the Tribunal concluded that it was not a supply of an educational course.  Therefore, if it could be established that the customer was located outside the UK no UK VAT\GST would be due.

The Tribunal concluded that from 2016, it was clear that Mandarin supplied its services to the parents who were located outside the EU. Mandarin was able to prove this as it maintained detailed records of customers and had an agreement with the parents.  As a result, the place of supply was outside the EU and no UK VAT\GST applied. The Tribunal was not prepared to accept the argument that in reality the services were supplied to the students because the contractual position was clear that the parents in most cases were party to the contract and in most cases funded the coaching services.

For periods before 2016, Mandarin had contracted with the students and did not have sufficient records to be able to prove that they were located outside the EU.  As a result, the Tribunal accepted HMRC’s arguments that the presumption was that the place of residence was the UK and VAT\GST was due.


The case shows how basic issues such as the location and identity of customers can make a big difference to the VAT\GST liability of supplies.  The case also demonstrates how the dividing line between an education and consulting service can also make a major difference.

If you are impacted by any of these issues, please contact us.




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