Focus on the contracts rather than the economic reality

The taxpayer’s business was mainly internet-based. It supplied students with essays coursework and dissertations by academic experts. The student could specify the grade they wished to achieve so setting the academic standard of the essay. Although students were not supposed to claim the work as their own it was understood this happened in practice.

The taxpayer said it was acting as an agent in bringing together the author and the student; output tax was therefore payable on the commission the agency retained. HMRC said the commercial reality was that the author was working as a subcontractor for the taxpayer with the latter supplying a completed essay as principal to the student. Output tax was therefore due on the full payment made by the student.

The First-tier Tribunal agreed with HMRC. The taxpayer appealed.

After examining the contracts with writers and customers the Upper...