C-5/17 DPAS

JUDGMENT OF THE COURT (Second Chamber)

25 July 2018 ( *1 )

(Reference for a preliminary ruling — Common system of value added tax — Directive 2006/112/EC — Exemption — Article 135(1)(d) — Transactions concerning payments and transfers — Concept — Scope — Dental payment plan by direct debit)

In Case C‑5/17,

REQUEST for a preliminary ruling under Article 267 TFEU from the Upper Tribunal (Tax and Chancery Chamber) (United Kingdom), made by decision of 28 November 2016, received at the Court on 6 January 2017, in the proceedings

Commissioners for Her Majesty’s Revenue and Customs

v

DPAS Limited,

THE COURT (Second Chamber),

composed of M. Ilešič, President of the Chamber, A. Rosas, C. Toader, A. Prechal and E. Jarašiūnas (Rapporteur), Judges,

Advocate General: H. Saugmandsgaard Øe,

Registrar: L. Hewlett, Principal Administrator,

having regard to the written procedure and further to the hearing on 24 January 2018,

after considering the observations submitted on behalf of:

DPAS Limited, by J. Martindale, Solicitor, C. McDonnell, Barrister, and J. Walters QC,

the United Kingdom Government, by Z. Lavery and J. Kraehling, acting as Agents, and by S. Pritchard, Barrister, and K. Beal QC,

the European Commission, by L. Lozano Palacios and R. Lyal, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 21 March 2018,

gives the following

Judgment

Legal context and the dispute

1This request for a preliminary ruling concerns the interpretation of Article 135(1)(d) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1) (‘the VAT Directive’).

2The request has been made in the course of proceedings between the Commissioners for Her Majesty’s Revenue and Customs (‘the tax authority’) and DPAS Limited concerning the refusal by the tax authority to exempt from value added tax (VAT) a supply of services made by DPAS.

Legal context

EU law

3Article 2(1)(c) of the VAT Directive makes ‘the supply of services for consideration within the territory of a Member State by a taxable person acting as such’ subject to VAT.

4Chapter 3 of Title IX of that directive, entitled ‘Exemptions’, contains Article 135(1)(b) to (g), which provides, in substantially identical terms, the exemptions previously provided for, respectively, in points 1 to 6 of Article 13B(d) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1) (‘the Sixth Directive’).

5Under Article 135(1)(d) of the VAT Directive:

‘Member States shall exempt the following transactions:

…

transactions, including negotiation, concerning deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments, but excluding debt collection;

…’

United Kingdom law

6Section 31(1) of the Value Added Tax Act 1994 provides that ‘a supply of goods or services is an exempt supply if it is of a description for the time being specified in Schedule 9’.

7Schedule 9 refers to several groups of goods and services that qualify for exemption from VAT. Group 5 thereof covers finance. It provides for the exemption of the following services:

‘…

1The issue, transfer or receipt of, or any dealing with, money, any security for money or any note or order for the payment of money.

…

5The provision of intermediary services in relation to any transaction comprised in item 1, 2, 3, 4 or 6 (whether or not any such transaction is finally concluded) by a person acting in an intermediary capacity.

…’

The dispute in the main proceedings and the questions referred for a preliminary ruling

8DPAS, which is the acronym for ‘Dental Plan Administration Services’, designs, implements and manages dental plans in the United Kingdom. Those plans, provided by DPAS to dentists, are subsequently practice-branded by DPAS on behalf of the dentists to their patients.

9According to the order for reference, the concept of a ‘dental plan’ refers, in the present case, to an arrangement between a dentist and his patient under which the dentist agrees to provide dental care to the patient, who agrees in return to pay a specified amount monthly, agreed between the dentist and his patient. That plan also includes other services, namely insurance cover for certain risks not covered by the plan and ‘payment administration services’ provided by DPAS.

10Patients make monthly payments from their bank accounts to DPAS’s bank account by way of a direct debit mandate. According to the order for reference, the manner of implementation of the direct debit is ‘materially the same as that described in paragraphs 7 to 11 of the [judgment of 28 October 2010, AXA UK, C‑175/09, EU:C:2010:646]’. Each of those payments includes the amount due from the patient to the dentist, the amount due from the patient to the insurer and the amount due from the patient to DPAS. Each month, DPAS pays to the dentists the aggregate amount payable to them in respect of all of their patients who have paid the agreed monthly amount, less, inter alia, an amount retained by DPAS as a charge for its services.

11Until 1 January 2012, the contractual arrangements implementing the dental plans were concluded solely between DPAS and the dentists. The tax authority took the view that DPAS carried out transactions concerning payments and transfers which were exempt from VAT under Article 13B(d)(3) of the Sixth Directive, and subsequently under Article 135(l)(d) of the VAT Directive.

12On 28 October 2010, the Court delivered its judgment in AXA UK (C‑175/09, EU:C:2010:646) which concerns the liability to VAT of services provided by Denplan Ltd, a competitor of DPAS which also administers dental payment plans on behalf of dentists. In that judgment, the Court found that Denplan provided debt collection and factoring services within the meaning of Article 13B(d)(3) of the Sixth Directive, since the purpose of its services is to obtain payment of debts owed to Denplan’s clients, namely dentists, and that, accordingly, those services could not benefit from the exemption laid down in that provision.

13Following that judgment, DPAS restructured the contractual aspects of its dental plans with the intention of henceforth making, as from 1 January 2012, supplies of services not only to dentists but also to patients.

14Thus, first, by letter of 8 September 2011 addressed to its dentist clients, DPAS informed them that, in order not to increase its prices as a consequence of the judgment of 28 October 2010, AXA UK (C‑175/09, EU:C:2010:646), it would be making certain ‘purely administrative changes’, without affecting the amounts charged to them or to their patients and without making any ‘practical difference to the current arrangements’. It notified them that, to that end, the former contractual arrangements would be amended.

15Before the planned amendment, those contractual arrangements consisted of a contract between DPAS and the dentist for the provision of dental payment plan services and a contract between DPAS, as insurance agent, and the patient for the provision of complementary insurance cover. The announced amendment consisted in splitting the first of those contracts into two separate contracts, namely, on the one hand, a contract between DPAS and the dentist for the provision of dental payment plan services, liable to VAT, and, on the other hand, a contract between DPAS and the patient for the provision of dental payment plan ‘facilities’. DPAS stated that its charges would remain unchanged, as it would bear the VAT payable on the services supplied to the dentist, and that the other services would remain exempt from VAT.

16The new general conditions applicable from 1 January 2012 and attached to that letter of 8 September 2011 stated, inter alia, that DPAS was not responsible for the failure or cancellation of the direct debit mandate.

17Second, DPAS sent each of its dentist clients a letter on their headed notepaper to be sent to their patients who had taken out a dental plan. That letter stated in particular that, up to that time, the dental practice had paid an administration charge to DPAS which was deducted from the monthly direct debit payment made by the patient, that it had been agreed with DPAS to make some changes in the dental plan administrative arrangements and that, from that point on, it was proposed that part of the monthly amount paid by the patient to DPAS by direct debit would henceforth be retained by the latter ‘in respect of its obligation to [the patient] to manage and administer [its] dental plan payments, [its] supplementary insurance cover and dental emergency helpline’. It was emphasised that these were ‘purely administrative changes [which did not affect] the cover provided under the dental plan or the level of [the] total monthly payments’.

18In that respect, each patient was requested to sign an acceptance form or, as the case may be, an authorisation form, stating that the patient agreed that DPAS would ‘manage and administer’ payments due under the dental plan and that the patient authorised DPAS to deduct, for that purpose, a monthly charge from the monthly payment agreed with the dentist.

19By letter of 17 April 2012, the tax authority informed DPAS of its decision that the provision of services relating to the management of dental plans provided by DPAS since 1 January 2012 constituted either a single supply of services for dentists, subject to VAT at the standard rate, or a supply of services for dentists, subject to VAT at the standard rate, and a provision of services for patients, also subject to VAT at the standard rate.

20DPAS challenged that decision before the First-tier Tribunal (Tax Chamber) (United Kingdom). Before that court, it contended that it supplied to dentists services subject to VAT at the standard rate and that it supplied to patients separate and VAT-exempt services. The tax authority maintained the position set out in that letter and, furthermore, claimed that the contractual arrangements effective from 1 January 2012 constituted an abusive practice within the meaning of the judgment of 21 February 2006, Halifax and Others (C‑255/02, EU:C:2006:121).

21By decision of 22 November 2013, that court held, inter alia, that DPAS supplied a service to patients in return for consideration, that this involved a transaction concerning payments which was exempt from VAT, and that it did not involve debt collection, as the service at issue was provided to the debtor and not to the creditor. It also ruled out the existence of an abusive practice.

22The tax authority appealed against that decision to the Upper Tribunal (Tax and Chancery Chamber) (United Kingdom). That court, in essence, confirmed that DPAS supplies services to patients in return for consideration. Furthermore, it confirmed that there was no abusive practice by referring, in particular, to the fact that, according to paragraph 73 of the judgment of 21 February 2006, Halifax and Others (C‑255/02, EU:C:2006:121), taxpayers may choose to structure their business in such a way as to limit their tax liability, and to the fact that it could not in this case be regarded as an artificial arrangement seeking to avoid the consequences of the judgment of 28 October 2010, AXA UK (C‑175/09, EU:C:2010:646). In that regard, that court rejected the tax authority’s argument based on the principle of fiscal neutrality, by finding that the supply of services in question before it is different from that which was at issue in the case which gave rise to that judgment, since the consumers of those services were different and benefited in different capacities.

23However, that court did not reach a conclusion on whether the services provided by DPAS to patients are exempt from VAT. It is of the opinion that the judgment of 28 October 2010, AXA UK (C‑175/09, EU:C:2010:646) supports DPAS’s argument that those services constitute a transaction concerning payments, and are therefore exempt from VAT under Article 135(1)(d) of the VAT Directive, but it also notes that the judgments of 26 May 2016, Bookit (C‑607/14, EU:C:2016:355), and of 26 May 2016, National Exhibition Centre (C‑130/15, not published, EU:C:2016:357), show that another assessment is possible, and it is unsure how they might be reconciled. Furthermore, assuming that the supply of services at issue comes within the concept of a ‘transaction concerning payments and transfers’ within the meaning of Article 135(1)(d) of the VAT Directive, that court is unsure as to the scope of the concept of ‘debt collection’ within the meaning of that provision, given that, even though the contractual terms have changed in such a way that the consideration for the supply of services is henceforth paid by the debtor instead of the creditor, the services supplied by the service provider remain essentially the same.

24In that context, the tax authority maintains, in essence, that the functional analysis of the services supplied by DPAS to patients is not different from that of the services which were at issue in the cases which gave rise to the judgments of 26 May 2016, Bookit (C‑607/14, EU:C:2016:355), and of 26 May 2016, National Exhibition Centre (C‑130/15, not published, EU:C:2016:357), from which it follows that a taxable person who uses other financial service providers for transfers between accounts does not carry out transactions concerning transfers. DPAS, it argues, thus merely performed administrative tasks. According to the tax authority, the judgment of 28 October 2010, AXA UK (C‑175/09, EU:C:2010:646), is not relevant in the present case, on the ground that DPAS provides services to patients and not to dentists. However, if it were appropriate to take the view that DPAS is making supplies of transfers to the dentists, the findings derived from the judgment of 28 October 2010, AXA UK (C‑175/09, EU:C:2010:646), would apply and the service in question should be classified as debt collection, if the principle of fiscal neutrality is not to be infringed.

25DPAS, by contrast, maintains that, according to the findings established in the judgment of 28 October 2010, AXA UK (C‑175/09, EU:C:2010:646), the provision of services in question is a transaction concerning payments but does not constitute a debt collection since, as of 1 January 2012, it is provided to debtors. It is therefore a supply of services exempt from VAT. The judgments of 26 May 2016, Bookit (C‑607/14, EU:C:2016:355), and of 26 May 2016, National Exhibition Centre (C‑130/15, not published, EU:C:2016:357), on the one hand, and the judgment of 28 October 2010, AXA UK (C‑175/09, EU:C:2010:646), on the other hand, are, it submits, compatible, considering in particular the significant factual differences in the cases which gave rise to those judgments. According to DPAS, the services which it provides are, by contrast, highly similar to the service in question in the case which gave rise to the judgment of 13 March 2014, ATP PensionService (C‑464/12, EU:C:2014:139).

26In that context, the Upper Tribunal (Tax and Chancery Chamber) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

Is a service, such as that performed by the taxpayer in the present case, consisting of directing, pursuant to a direct debit mandate, that money is taken by direct debit from a patient’s bank account and passed by the taxpayer, after deduction of the taxpayer’s remuneration, to the patient’s dentist and insurance provider, an exempt supply of transfer or payment services within Article 135(l)(d) of the … VAT Directive? In particular, do the decisions [of 26 May 2016, Bookit (C‑607/14, EU:C:2016:355), and of 26 May 2016, National Exhibition Centre (C‑130/15, not published, EU:C:2016:357),] lead to the conclusion that the exemption from VAT in Article 135(l)(d) [of the VAT Directive] is not applicable to a service, such as that performed by the taxpayer in the present case, which does not involve the taxpayer itself debiting or crediting any accounts over which it has control but which, where a transfer of funds results, is essential to that transfer? Or does the decision [of 28 October 2010, AXA UK (C‑175/09, EU:C:2010:646),] lead to the contrary conclusion?

What are the relevant principles to be applied for determining whether or not a service such as that performed by the taxpayer in the present case falls within the scope of “debt collection” within Article 135(l)(d) [of the VAT Directive]? In particular, if (as the Court decided in [the judgment of 28 October 2010, AXA UK (C‑175/09, EU:C:2010:646)] in relation to the same or a very similar service) such a service would constitute debt collection if provided to the person to whom the payment is due (i.e. the dentists in the present case and in [the case which gave rise to that judgment]), does that service also constitute debt collection if such a service is provided to the person from whom the payment is due (i.e. the patients in the present case)?’

Consideration of the questions referred

The first question

27By its first question, the referring court asks, in essence, whether Article 135(1)(d) of the VAT Directive must be interpreted as meaning that the VAT exemption which is provided for therein for transactions concerning payments and transfers applies to a supply of services, such as that at issue in the main proceedings, which consists, for the taxable person, in requesting from the relevant financial institutions, first, that a sum of money be transferred from a patient’s bank account to that of the taxable person pursuant to a direct debit mandate and, second, that that sum, after deduction of the remuneration due to that taxable person, be transferred from the latter’s bank account to the respective bank accounts of that patient’s dentist and insurer.

28In accordance with the Court’s settled case-law, the exemptions laid down in Article 135(1) of the VAT Directive constitute independent concepts of EU law whose purpose is to avoid divergences in the application of the VAT system as between one Member State and another (see judgments of 25 February 1999, CPP, C‑349/96, EU:C:1999:93, paragraph 15, and of 26 May 2016, Bookit, C‑607/14, EU:C:2016:355, paragraph 33 and the case-law cited).

29It is also settled case-law that the terms used to specify those exemptions must be interpreted strictly, since they constitute exceptions to the general principle that VAT is to be levied on all services supplied for consideration by a taxable person (see judgments of 10 March 2011, Skandinaviska Enskilda Banken, C‑540/09, EU:C:2011:137, paragraph 20, and of 26 May 2016, Bookit, C‑607/14, EU:C:2016:355, paragraph 34 and the case-law cited).

30In that context, it should be noted that Article 135(1)(d) of the VAT Directive provides that Member States are to exempt ‘transactions, including negotiation, concerning deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments, but excluding debt collection’.

31The transactions exempted under that provision are thus defined according to the nature of the services provided and not in terms of the person supplying or receiving the service. Accordingly, the exemption is subject, not to the condition that the transactions be effected by a certain type of institution or legal person, but to the condition that the transactions in question relate to the sphere of financial transactions (see, to that effect, judgments of 28 October 2010, AXA UK, C‑175/09, EU:C:2010:646, paragraph 26 and the case-law cited, and of 26 May 2016, Bookit, C‑607/14, EU:C:2016:355, paragraph 36).

32In the present case, only the exemption provided for in Article 135(1)(d) of the VAT Directive for ‘transactions … concerning … payments [and] transfers’ is at issue in the case in the main proceedings.

33In that regard, the Court has already held that a transfer is a transaction consisting of the execution of an order for the transfer of a sum of money from one bank account to another. It is characterised in particular by the fact that it involves a change in the legal and financial situation existing, on the one hand, between the person giving the order and the recipient and, on the other, between those parties and their respective banks and, in some cases, between the banks. Moreover, the transaction which produces that change is solely the transfer of funds between accounts, irrespective of its cause. Thus, a transfer being only a means of transmitting funds, the functional aspects are decisive for the purpose of determining whether a transaction constitutes a transfer within the meaning of Article 135(1)(d) of the VAT Directive (judgments of 5 June 1997, SDC, C‑2/95, EU:C:1997:278, paragraph 53, and of 26 May 2016, Bookit, C‑607/14, EU:C:2016:355, paragraph 38 and the case-law cited).

34Moreover, the wording of that provision does not in principle preclude a transfer from being broken down into separate services, which then constitute ‘transactions concerning transfers’ within the meaning of that provision (judgments of 5 June 1997, SDC, C‑2/95, EU:C:1997:278, paragraph 64, and of 26 May 2016, Bookit, C‑607/14, EU:C:2016:355, paragraph 39). The exemption provided for in that provision can, however, relate only to transactions which, viewed broadly, form a distinct whole, fulfilling in effect the specific, essential functions of such transfers, in so far as they have the effect of transferring funds and entail changes in the legal and financial situation resulting from that transfer (see, to that effect, judgments of 5 June 1997, SDC, C‑2/95, EU:C:1997:278, paragraphs 66 to 68, and of 26 May 2016, Bookit, C‑607/14, EU:C:2016:355, paragraph 39).

35That interpretation does not presuppose any particular method for effecting those transactions, since a transfer may be effected by an actual transfer of funds or by means of accounting entries (see, to that effect, judgment of 13 March 2014, ATP PensionService, C‑464/12, EU:C:2014:139, paragraphs 80 and 81).

36Services exempted under the VAT Directive must also be distinguished from the supply of mere physical, technical or administrative services. To that end, it is relevant to examine, in particular, the extent of the liability of the supplier of the services in question and, inter alia, whether that liability is restricted to technical aspects or whether it extends to the specific, essential aspects characterising the transactions (see, to that effect, judgments of 5 June 1997, SDC, C‑2/95, EU:C:1997:278, paragraph 66, and of 26 May 2016, Bookit, C‑607/14, EU:C:2016:355, paragraph 40).

37Furthermore, according to the Court’s settled case-law, transactions concerning transfers and transactions concerning payments are treated equally for the purposes of the exemption under Article 135(1)(d) of the VAT Directive (see, to that effect, judgments of 5 June 1997, SDC, C‑2/95, EU:C:1997:278, paragraph 50, and of 26 May 2016, Bookit, C‑607/14, EU:C:2016:355, paragraph 43 and the case-law cited).

38As the Advocate General also observed in points 35 and 39 of his Opinion, it follows from those factors that a supply of services may be regarded as a ‘transaction concerning transfers’ or as a ‘transaction concerning payments’ within the meaning of Article 135(1)(d) of the VAT Directive only where it has the effect of making the legal and financial changes which are characteristic of the transfer of a sum of money. By contrast, the supply of a mere physical, technical or administrative service not effecting such changes will not come within that concept (see, inter alia, to that effect, judgment of 26 May 2016, Bookit, C‑607/14, EU:C:2016:355, paragraphs 40 and 41).

39In the present case, it is apparent from the order for reference that the supply of services at issue in the main proceedings consists for DPAS, first, in requesting from the financial institution of the patient who entered into a dental plan pursuant to a direct debit mandate that a predetermined sum of money be transferred from that patient’s bank account to DPAS’s account and, second, in subsequently requesting the financial institution with which it holds its account to transfer that sum from that account to the respective bank accounts of the dentist and the patient’s insurer, DPAS retaining part of that sum as remuneration due to it by the patient for that transaction, which DPAS itself describes as ‘management payments [due by the patient under] dental plans [which he has taken out]’.

40Such a supply of services does not, as such, effect the legal and financial changes which characterise the transfer of a sum of money within the meaning of the case-law referred to in paragraphs 33 to 38 of the present judgment, but is administrative in nature.

41DPAS does not itself carry out the transfers or the materialisation in the relevant bank accounts of the sums of money agreed in the context of the dental plans at issue in the main proceedings, but asks the relevant financial institutions to carry out those transfers. By contrast, as the tax authority contends, a supply of services such as that at issue in the main proceedings is comparable to the card-handling fees which were at issue in the case giving rise to the judgment of 26 May 2016, Bookit (C‑607/14, EU:C:2016:355). That case concerned, in essence, a supply of services which consisted for the taxpayer in submitting to the financial institutions concerned requests for payment which the customers had previously accepted to carry out with a view to purchasing a product and which constituted a preparatory stage to carrying out transactions concerning payments and transfers effected by those establishments (see, to that effect, judgment of 26 May 2016, Bookit, C‑607/14, EU:C:2016:355, paragraphs 44 to 51 and 53).

42As the Advocate General has also observed in point 51 of his Opinion, a supply of services such as that at issue in the main proceedings is merely a step prior to the transactions concerning payments and transfers covered by Article 135(1)(d) of the VAT Directive.

43In that regard, it may also be noted that, admittedly, the supply of services at issue in the main proceedings is, in the context of the dental plans concerned, essential to making the payments owed by the patients to their dentists and insurers, since it is through DPAS’s involvement that the patients’ intention to make the payments in question is expressed. However, since Article 135(1)(d) of the VAT Directive must be interpreted strictly, the mere fact that a service is essential for completing an exempt transaction does not warrant the conclusion that that service is to be exempted (judgments of 13 December 2001, CSC Financial Services, C‑235/00, EU:C:2001:696, paragraph 32, and of 26 May 2016, Bookit, C‑607/14, EU:C:2016:355, paragraph 45 and the case-law cited).

44Furthermore, it is apparent from the new general conditions implemented with effect from 1 January 2012, attached to the letter of 8 September 2011 addressed to the dentists and reproduced in the order for reference, that DPAS is not responsible for the failure or cancellation of a direct debit mandate on the basis of which DPAS requests that the sums which it must subsequently transfer to the dentist and to the insurer be collected from the bank account of the patient concerned.

45As regards, moreover, the general scheme and purpose of the VAT Directive, it should be noted, first, that the transactions exempted under Article 135(1)(d) to (f) of that directive, even though they do not necessarily have to be carried out by a bank or a financial institution, are, by their nature, financial transactions (see, inter alia, judgment of 22 October 2015, Hedqvist, C‑264/14, EU:C:2015:718, paragraph 37 and the case-law cited, and, to that effect, judgment of 26 May 2016, Bookit, C‑607/14, EU:C:2016:355, paragraphs 36 and 54). However, as has been established in paragraphs 40 and 41 of the present judgment, a provision of services such as that at issue in the main proceedings is administrative in nature.

46Second, the exemptions provided for in Article 135(1)(d) to (f) of the VAT Directive seek, inter alia, to alleviate the difficulties connected with determining the taxable amount and the amount of VAT deductible (see, inter alia, judgments of 19 April 2007, Velvet & Steel Immobilien, C‑455/05, EU:C:2007:232, paragraph 24, and of 22 October 2015, Hedqvist, C‑264/14, EU:C:2015:718, paragraph 36). It is, however, apparent from the order for reference that the amount of remuneration due by the patient to DPAS for the supply of services at issue in the main proceedings corresponds to a difference between the amount collected from the account of that patient and the amounts subsequently transferred by DPAS to that patient’s dentist and insurer. In those circumstances, the determination of the taxable amount does not present any particular difficulty.

47It must therefore be held, in view of all of the foregoing, that a supply of services such as that at issue in the main proceedings cannot come under the exemption provided for in Article 135(1)(d) of the VAT Directive for transactions concerning payments and transfers.

48In addition, the national court is unsure as to the relevance, for the purposes of the present case, of the judgment of 28 October 2010, AXA UK (C‑175/09, EU:C:2010:646). In that regard, it should be noted, as did the Advocate General in points 59 to 63 of his Opinion, that, in that judgment, the Court did not examine whether the supply of services at issue in the case which gave rise to it met the criterion established by the Court’s previous case-law for the purpose of identifying a transaction concerning payments and transfers, from which it was already clear that the relevant criterion in that regard was whether the supply of services at issue had the effect of making the legal and financial changes which are characteristic of the transfer of a sum of money (see judgments of 5 June 1997, SDC, C‑2/95, EU:C:1997:278, paragraphs 53 and 66, and of 13 December 2001, CSC Financial Services, C‑235/00, EU:C:2001:696, paragraphs 26 to 28), but focused its analysis on the question of whether that supply of services was covered by the concept of ‘debt collection’ within the meaning of Article 13B(d)(3) of the Sixth Directive, now Article 135(1)(d) of the VAT Directive.

49It is also not apparent from that judgment whether the Court thereby wished to broaden the concept of ‘transactions … concerning … payments [and] transfers’, within the meaning of those provisions, which it had already defined by its previous case-law, so as to include transactions which do not, in themselves, make the legal and financial changes which are characteristic of the transfer of a sum of money, or to redefine that concept by establishing new criteria.

50In the light of those factors, no conclusion in favour of the exemption of the supply of services at issue in the main proceedings, on the ground that it constitutes a transaction concerning payments or transfers, within the meaning of the Court’s case-law, can be drawn from that judgment.

51In the light of all of the foregoing considerations, the answer to the first question is that Article 135(1)(d) of the VAT Directive must be interpreted as meaning that the VAT exemption which is provided for therein for transactions concerning payments and transfers does not apply to a supply of services, such as that at issue in the main proceedings, which consists for the taxable person in requesting from the relevant financial institutions, first, that a sum of money be transferred from a patient’s bank account to that of the taxable person pursuant to a direct debit mandate and, second, that that sum, after deduction of the remuneration due to that taxable person, be transferred from the latter’s bank account to the respective bank accounts of that patient’s dentist and insurer.

The second question

52In the light of the answer to the first question, there is no need to reply to the second question.

Costs

53Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

On those grounds, the Court (Second Chamber) hereby rules:

Article 135(1)(d) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that the exemption from value added tax which is provided for therein for transactions concerning payments and transfers does not apply to a supply of services, such as that at issue in the main proceedings, which consists for the taxable person in requesting from the relevant financial institutions, first, that a sum of money be transferred from a patient’s bank account to that of the taxable person pursuant to a direct debit mandate and, second, that that sum, after deduction of the remuneration due to that taxable person, be transferred from the latter’s bank account to the respective bank accounts of that patient’s dentist and insurer.

Signatures

Ilešič

Rosas

Toader

Prechal

Jarašiūnas

Delivered in open court in Luxembourg on 25 July 2018.

A. Calot Escobar

Registrar

M. Ilešič

President of the Second Chamber

( *1 ) Language of the case: English.

OPINION OF ADVOCATE GENERAL

SAUGMANDSGAARD ØE

delivered on 21 March 2018 ¹

(Reference for a preliminary ruling — Common system of value added tax — Directive 2006/112/EC — Exemption — Article 135(1)(d) — Transactions concerning payments and transfers — Absence — Design and implementation of direct debit dental payment plans — Lack of a supply entailing the transfer of a sum of money — Debt collection — Principle of economic reality — The identity of the formal recipient of the supply is irrelevant)

I. Introduction

1By decision of 28 November 2016, which was received at the Court on 6 January 2017, the Upper Tribunal (Tax and Chancery Chamber) (United Kingdom) submitted to the Court a request for a preliminary ruling on the interpretation of Article 135(1)(d) of Directive 2006/112/EC (‘the VAT Directive’). ²

2This request was made in the course of proceedings between DPAS Limited and Commissioners for Her Majesty’s Revenue and Customs (‘the tax authority’) concerning the refusal by the tax authority to exempt from value added tax (VAT) a supply of services made by DPAS.

3DPAS provides practice-branded dental plans to dentists and supplies dental plan administration services to patients who subscribe to those plans. The question raised in the national proceedings is, in essence, whether the services provided to those patients constitute ‘transactions concerning payments or transfers’ which are exempt under Article 135(1)(d) of the VAT Directive.

4I will propose that the Court answer that question in the negative since a supply of services such as that at issue in the dispute in the main proceedings does not, in itself, result in the legal and financial changes which are characteristic of the transfer of a sum of money. In practice, that response means that such a supply must be subject to VAT.

II. Legal framework

A. EU law

5In Chapter 3 of Title IX of the VAT Directive, Article 135(1) provides:

‘Member States shall exempt the following transactions:

…

transactions, including negotiation, concerning deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments, but excluding debt collection;

…’

B. United Kingdom law

6Section 31 of the Value Added Tax Act 1994 provides that a supply of services is an exempt supply if it is of a description specified in Schedule 9 to that Act.

7Schedule 9 provides, inter alia:

‘GROUP 5 — FINANCE

[The following are exempt from VAT:]

1The issue, transfer or receipt of, or any dealing with, money, any security for money or any note or order for the payment of money.

…

5The provision of intermediary services in relation to any transaction comprised in item 1 … (whether or not any such transaction is finally concluded) by a person acting in an intermediary capacity.’

8Note (1A) to Group 5 states:

‘Item 1 does not include a supply of services which is preparatory to the carrying out of a transaction falling within that item.’

III. The dispute in the main proceedings and the questions referred for a preliminary ruling

9DPAS, which is the acronym for ‘Dental Plan Administration Services’, designs and implements dental plans in the United Kingdom.

10DPAS provides practice-branded dental plans to dentists and supplies dental plan administration services to the patients of dentists. In the present case, a ‘dental plan’ refers to the arrangements between a dentist and his or her patient under which the dentist agrees to provide a certain level of dental care and, in return, the patient agrees to pay a specified amount monthly. That plan also includes other services, namely insurance and payment administration services which are provided by DPAS.

11DPAS manages the administration, finance and insurance aspects of the dental plans. DPAS provides advice to dentists and their staff in particular in setting up the plan and provides marking materials such as brochures, leaflets and posters, registration forms, correspondence/headed notepaper and plan membership cards.

12Those dental plans allow patients to spread the cost of dental care evenly over the whole year. Accordingly, patients make monthly payments to DPAS by means of a direct debit mandate. According to the referring court, the manner in which the direct debit operates is materially identical to that described in paragraphs 7 to 11 of the judgment in AXA UK. ³ When questioned by the Court on that subject, the referring court confirmed that the services provided by DPAS are ‘the same or very similar’ to those described in the judgment in AXA UK.

13Until 1 January 2012, the dental plans had been structured by DPAS as services provided to dentists and the contractual arrangements implementing those plans were concluded between DPAS and the dentists. DPAS received a fixed charge from each dentist on a monthly basis, which, in the overwhelming majority of cases, amounted to GBP 366.66 (approximately EUR 415), and a ‘per patient’ charge ranging from GBP 0.94 to GBP 2.90 (approximately EUR 1.06 to EUR 3.28). DPAS received its charges by deducting them from the amounts collected by direct debit from patients.

14In practice, DPAS requested, pursuant to a direct debit mandate, that the patient’s bank transfer the agreed amount from the patient’s bank account to its own bank account. DPAS then requested that its own bank transfer to the dentist’s bank account the total amount due to that dentist, taking into account those patients who had paid their monthly charge by direct debit and deducting the amount charged by DPAS for its services.

15The tax authority took the view that DPAS was carrying out transactions concerning payments or transfers which were exempt from VAT under Article 135(1)(d) of the VAT Directive or the equivalent provision of the Sixth Directive. ⁴

16On 28 October 2010, the Court gave its judgment in AXA UK ⁵ which concerned the liability to VAT of services provided by Denplan Ltd, a competitor of DPAS which also offers dental payment plans on behalf of dentists. In that judgment, the Court held that services such as those provided by Denplan constituted, ‘as a matter of principle’, transactions concerning payments, but had to be regarded as debt collection and factoring services and, accordingly, were not eligible for the abovementioned exemption.

17Following that judgment, DPAS restructured the contractual aspects of its dental plans from 1 January 2012 so as to make supplies of services not only to dentists, but also to patients.

18In a letter dated 8 September 2011 and addressed to its dentist clients, DPAS explained, in essence, that restructuring as follows:

the practical effect of the judgment in AXA UK ⁶ was to make the services provided by DPAS to dentists subject to VAT, whereas the tax authority had previously regarded them as exempt, which would have led to an additional cost in the order of 20% which DPAS would have had to pass on to its customers;

up to that time, the dental plans administered by DPAS included, first, a contract between DPAS and the dentist for the delivery of dental payment plan services and, secondly, a contract between DPAS and the patient for the supply of supplementary insurance cover;

the proposed restructuring consisted in splitting the first of the abovementioned contracts into two, namely a contract between DPAS and the dentist concerning dental payment plan services and a contract between DPAS and the patient concerning dental payment plan facilities;

DPAS stated that the amounts it charged would remain unchanged, since it would bear the VAT payable on the service supplied to the dentist, whilst the other services would remain exempt from VAT;

DPAS emphasised that those changes were ‘purely administrative’ and that they made ‘no practical difference to the current arrangements’.

19DPAS also sent dentists a draft letter to be sent to patients who had taken out a dental plan. That letter stated that, up to that time, the dental practice had paid an administration charge to DPAS, which was deducted from the monthly direct debit payment made by each patient. That letter proposed that part of the total monthly amount paid by direct debit to DPAS would henceforth be retained by DPAS in respect of its obligation to the patient to manage and administer the dental payment plan, the supplementary insurance policy and the dental emergency helpline. That letter emphasised again that these were ‘purely administrative changes [which did not affect] the cover provided under the dental plan or … the level of … total monthly payments’.

20The referring court found that DPAS supplies services to patients in the context of the new contractual arrangements. Those arrangements create a legal relationship between DPAS and the patient under which the patient agrees that part of each monthly charge payable under the dental plan is consideration for the services provided by DPAS to the patient.

21However, that court did not reach a conclusion as to whether the services provided by DPAS to patients are exempt [from VAT]. It notes that, to answer that question, it must be determined whether those services are transactions concerning payments or transfers within the meaning of Article 135(1)(d) of the VAT Directive and, if necessary, whether they constitute debt collection. In that regard, the referring court considers that the judgments in Bookit ⁷ and National Exhibition Centre ⁸ did not resolve those issues with sufficient clarity.

22In that context, the Upper Tribunal (Tax and Chancery Chamber) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

Is a service, such as that performed by the taxpayer in the [main proceedings], consisting of directing, pursuant to a direct debit mandate, that money is taken by direct debit from a patient’s bank account and passed by the taxpayer, after deduction of the taxpayer’s remuneration, to the patient’s dentist and insurance provider, an exempt supply of transfer or payment services within Article 135(1)(d) of the Principal VAT Directive? In particular, do the decisions [of 26 May 2016, Bookit (C‑607/14, EU:C:2016:355), and National Exhibition Centre (C‑130/15, not published, EU:C:2016:357)] lead to the conclusion that the exemption from VAT in Article 135(l)(d) [of the VAT Directive] is not applicable to a service, such as that performed by the taxpayer in the present case, which does not involve the taxpayer itself debiting or crediting any accounts over which it has control but which, where a transfer of funds results, is essential to that transfer? Or does the decision [of 28 October 2010, AXA UK (C‑175/09, EU:C:2010:646)] lead to the contrary conclusion?

What are the relevant principles to be applied for determining whether or not a service such as that performed by the taxpayer in the present case falls within the scope of “debt collection” within Article 135(1)(d) [of the VAT Directive]? In particular, if (as the Court decided in [the judgment of 28 October 2010, AXA UK (C‑175/09, EU:C:2010:646)] in relation to the same or a very similar service) such a service would constitute debt collection if provided to the person to whom the payment is due (i.e. the dentists in the present case and in [the case cited above]), does that service also constitute debt collection if such a service is provided to the person from whom the payment is due (i.e. the patients in the present case)?’

IV. The procedure before the Court

23The request for a preliminary ruling was lodged at the Court Registry on 6 January 2017.

24Written observations were submitted by the Government of the United Kingdom and the European Commission.

25DPAS, the Government of the United Kingdom and the Commission attended the hearing of 24 January 2018 in order to make their oral observations.

V. Analysis

26By its questions, the referring court seeks to ascertain, in essence, whether Article 135(1)(d) of the VAT Directive must be interpreted as meaning that the supply of a service such as that provided by DPAS to patients in the context of the dispute in the main proceedings benefits from the exemption provided for therein for ‘transactions concerning payments or transfers’.

27In order to answer those questions, I will begin by identifying the criterion established by the Court to identify a ‘transaction concerning payments or transfers’ within the meaning of Article 135(1)(d) of the VAT Directive. In my view, it is clear from the case-law that such a transaction must result in the legal and financial changes which are characteristic of the transfer of a sum of money. In accordance with that criterion, I do not consider it possible to categorise the supply of a service such as that at issue in the dispute in the main proceedings as a ‘transaction concerning payments or transfers’ (Section A).

28Having regard to the referring court’s questions, and for the sake of transparency, I would emphasise that, to me, that interpretation is not reconcilable with the solution adopted by the Court in the judgment in AXA UK ⁹ with regard to the classification of a ‘transaction concerning payments or transfers’ (Section B).

29Finally, I should point out that the fact, raised in the second question, that a supply of services is formally provided by the taxable person (DPAS) to the person from whom the payment is due (the patient) and not the creditor of that payment (the dentist), following an amendment to the contractual arrangements between those parties, is irrelevant for the purposes of applying that exemption since the economic reality of that supply has remained unchanged (Section C).

A. A supply of services such as that at issue in the dispute in the main proceedings does not constitute a ‘transaction concerning payments or transfers’ within the meaning of Article 135(1)(d) of the VAT Directive (first question)

30By its first question, the referring court asks, in essence, whether Article 135(1)(d) of the VAT Directive must be interpreted as meaning that a supply of services such as that performed by the taxable person in the dispute in the main proceedings, consisting in requesting from the relevant financial institutions, first, that a sum of money be transferred from the patient’s bank account to that of the taxable person pursuant to a direct debit mandate and, second, that that sum be subsequently transferred from the latter account, after deduction of the remuneration due to the taxable person, to the dentist’s and the patient’s insurer’s respective bank accounts, constitutes a ‘transaction concerning payments or transfers’ which is exempt under that provision.

31I share the view held by the Government of the United Kingdom and the Commission that that question should be answered in the negative. In other words, the service provided by DPAS to patients, in the circumstances of the dispute in the main proceedings, does not constitute a ‘transaction concerning payments or transfers’ which is exempt under the provision cited above, for the following reasons.

32To my knowledge, in its judgment in SDC, ¹⁰ the Court defined the concept of a ‘transaction concerning payments or transfers’ in the context of the VAT system for the first time. In my opinion, it is clear from that definition that the decisive criterion which makes it possible to identify a transfer lies in the changes which take place in the legal and financial situation which are characteristic of the transfer of a sum of money. ¹¹

33It is true that that definition refers strictly to the concept of a ‘transfer’ and not that of a ‘transaction concerning transfers’ within the meaning of Article 135(1)(d) of the VAT Directive.

34In that last regard, the Court has stated that the wording of that provision does not preclude a transfer from being broken down into separate services which then constitute ‘transactions concerning transfers’ within the meaning of that provision. While it is not inconceivable that the exemption at issue may extend to services which are not transfers per se, the fact remains that that exemption can relate only to transactions which form a distinct whole, fulfilling in effect the specific, essential functions of such transfers. ¹²

35In other words, a complex supply of services may be regarded as ‘transactions concerning transfers’ only where it has the effect of making the legal and financial changes which are characteristic of the transfer of a sum of money.

36With the notable exception of the judgment in AXA UK, ¹³ which I shall address in Section B below, the Court has always applied the criterion of the transfer of a sum of money for the purpose of determining the existence of ‘transactions concerning transfers’ within the meaning of Article 135(1)(d) of the VAT Directive. ¹⁴ More generally, the Court has made it clear that the transactions referred to in that provision concern services or instruments that operate as a way of transferring money. ¹⁵

37The Court has also stated in several judgments that the considerations relating to transactions concerning transfers are also applicable to transactions concerning payments. In other words, those two concepts are subject to the same treatment for the purposes of the exemption provided for in Article 135(1)(d) of the VAT Directive. ¹⁶ That common treatment does not seem to me to be open to criticism, since the transfer is one of the practical ways in which a payment may be made. In my opinion, that common treatment is also dictated by the principle of fiscal neutrality, which precludes treating comparable supplies of services, which are thus in competition with each other, differently for VAT purposes. ¹⁷

38I note that the fact that DPAS is not a financial institution is not sufficient to exclude the supply of services by DPAS from the scope of the exemption provided for in Article 135(1)(d) of the VAT Directive. According to settled case-law, the transactions covered by that exemption are defined according to the nature of the services provided and not according to the person supplying or receiving the services. ¹⁸ Accordingly, the Court has held, inter alia, that certain services supplied to occupational pension funds by an operator other than a financial institution involving, in particular, the management of workers’ individual accounts and contributions paid by employers fell within the scope of that exemption. ¹⁹

39Nevertheless, it follows from the foregoing that the supply of a mere physical, technical or administrative service which does not result in the legal and financial changes which are characteristic of the transfer of a sum of money is not covered by the exemption provided for in the provision cited above. ²⁰

40Yet, services such as those provided by DPAS in the circumstances of the main proceedings fall precisely, in my view, under that category of ‘mere physical, technical or administrative services’ which remain subject to VAT.

41According to the description provided by the referring court in its first question, the supply of services at issue in the dispute in the main proceedings consists in DPAS requesting from a financial institution, pursuant to a direct debit mandate, that a sum of money be collected from the patient’s bank account and paid to DPAS, which then asks its bank to transfer that sum of money, after deduction of the remuneration due to it, to the dentist and patient’s insurer.

42I should point out that, having regard to the obligation to interpret strictly the exemption provided for in Article 135(1)(d) of the VAT Directive, the fact that the supply of services by DPAS is essential for completing the transfer or payment, in so far as it marks the patient’s intention to transfer the sum of money from his account, is not sufficient to put it on the same footing as a ‘transaction concerning payments or transfers’ which is exempt under that provision. ²¹

43A supply of that kind does not, in itself, result in the legal and financial changes which are characteristic of the transfer of a sum of money, within the meaning of the case-law cited above.

44In the context of that supply, DPAS does not carry out the transfer of the sums of money agreed in the context of the dental plans at issue in the dispute in the main proceedings itself, ²² but asks the relevant financial institutions to do so. Accordingly, DPAS’s involvement is prior to the transfer transactions carried out by those institutions, with the latter, however, falling within the scope of the exemption provided for in Article 135(1)(d) of the VAT Directive.

45Likewise, a patient who makes a transfer order to his dentist does not carry out the transfer of the sum of money agreed himself, but asks his bank to do so. The fact that DPAS obtained the authority to request the transfer of a sum of money in the name and on behalf of the patient, from the patient’s bank, cannot have the effect of transforming that preliminary step into a ‘transaction concerning payments or transfers’ within the meaning of the provision cited above.

46In other words, DPAS provides administrative management services the formal recipients of which are the patients, following the restructuring of the contractual arrangements initiated by DPAS, and it is the relevant financial institutions which carry out the financial transactions falling within the exemption provided for in Article 135(1)(d) of the VAT Directive. The administrative nature of the services provided by DPAS is supported, in my view, by the content of the letter for patients following the contractual restructuring of the dental payment plans. ²³

47In my view, that interpretation is also confirmed by the judgments in Bookit ²⁴ and National Exhibition Centre, ²⁵ which were delivered after the judgment in AXA UK ²⁶ and concerned the supply of services which were more closely linked to transfers than the supplies at issue in AXA UK and in the dispute in the main proceedings.

48A card handling service, which was at issue in those judgments, included, in particular, the transmission of an end-of-day settlement file by the service provider to the merchant acquirer bank, since that transmission triggered the process of payment or transfer of the sums concerned from the card issuers to that merchant acquirer bank and, ultimately, to the account of that service provider, the only payments or transfers that were in fact made being those in respect of which the necessary information was included in that file. ²⁷

49Yet, the Court has held that a service of that kind cannot be classed as a ‘transaction concerning payments or transfers’ which is exempt under Article 135(1)(d) of the VAT Directive, since it does not, in itself, result in the legal and financial changes characterising the transfer of a sum of money. ²⁸

50The Court was right to point out that that service consisted, in essence, in an exchange of information between a trader and its merchant acquirer bank with a view to receiving payment for goods or services offered for sale and, therefore, did not constitute a financial transaction intended to fall within the exemption cited above. ²⁹

51I see no reason not to extend that reasoning to a supply of services such as that at issue in the dispute in the main proceedings. A supply of that kind, like the supplies which formed the subject matter in the two judgments cited above, is merely a step prior to the transfer or payment transaction covered by that exemption and must, therefore, remain subject to VAT.

52That conclusion is, in addition, confirmed by the objectives pursued by Article 135(1)(d) of the VAT Directive. First, according to settled case-law, the transactions exempted under Article 135(1)(d) to (f) of that directive are, by their nature, financial transactions even though they do not necessarily have to be carried out by a bank or a financial institution. ³⁰

53In the present case, supplies such as those at issue in the dispute in the main proceedings are administrative in nature, as explained above. As the Government of the United Kingdom was right to point out, a large number of operators now accept payments by direct debit or by credit card. The management of the administrative aspects of those payment methods cannot, in my view, be treated as a financial transaction which is exempt under the abovementioned provisions.

54Second, also according to settled case-law, the exemptions cited above seek, inter alia, to alleviate the difficulties connected with determining the taxable amount and the amount of VAT deductible. ³¹ In that regard, it is clear from the explanations provided by the referring court that the remuneration received by DPAS in respect of its services consists in the difference between the amounts collected from patients and the amounts transferred by DPAS to the dentist and the insurer. Therefore, the determination of the taxable amount does not present any particular difficulty and accordingly that transaction does not qualify for exemption under Article 135(1)(d) of the VAT Directive.

55In the light of the foregoing, I propose that the Court should answer the first question referred as follows: Article 135(1)(d) of the VAT Directive must be interpreted as meaning that a supply of services such as that performed by the taxable person in the dispute in the main proceedings, consisting in requesting from the relevant financial institutions, first, that a sum of money be transferred from the patient’s bank account to that of the taxable person pursuant to a direct debit mandate and, second, that that sum be subsequently transferred from the latter account, after deduction of the remuneration due to the taxable person, to the dentist’s and the patient’s insurer’s respective bank accounts, does not constitute a ‘transaction concerning payments or transfers’ which is exempt under that provision since it does not, in itself, result in the legal and financial changes which characterise the transfer of a sum of money.

B. The categorisation of a ‘transaction concerning payments or transfers’ used in the judgment of 28 October 2010, AXA UK (C‑175/09, EU:C:2010:646)

56In order to fully answer the questions from the referring court, I must again mention the solution adopted by the Court in the judgment in AXA UK ³² with regard to the categorisation of a ‘transaction concerning payments or transfers’. A careful reader will have already inferred from the foregoing that, in my view, that solution is hardly reconcilable with the case-law both before and after that judgment.

57In that regard, it is clear from the order for reference and from the clarification provided by that court at the request of the Court of Justice that the service provided by DPAS, which is at issue in the dispute in the main proceedings, is ‘the same or very similar’ to that provided by Denplan, as described in paragraphs 7 to 11 of the judgment in AXA UK. ³³ I see no reason to call into question that finding of facts, which is a matter for the national court. I note that DPAS has, at least implicitly, conceded that they are the same or very similar since it restructured the contractual arrangements implementing its services with a view to avoiding the consequences of that judgment. ³⁴

58In Section A above, I stated that the supply of services such as that provided by DPAS in the dispute in the main proceedings does not constitute a ‘transaction concerning payments or transfers’ since it does not, in itself, result in the legal and financial changes which characterise the transfer of a sum of money.

59By contrast, in paragraph 28 of the judgment in AXA UK, ³⁵ the Court held that the supply of a service such as that provided by Denplan constituted, ‘as a matter of principle’, a transaction concerning payments which is exempt under Article 135(1)(d) of the VAT Directive. Nevertheless, it went on to hold that such a supply had to be categorised as debt collection and factoring and, therefore, had to be subject to VAT.

60In so doing, the Court did not examine whether the supply of services by Denplan satisfied the criterion established by the previous case-law to identify a ‘transaction concerning payments or transfers’, namely the fact that it makes the legal and financial changes which characterise the transfer of a sum of money. Yet, there is little doubt in my mind that such a service, like the service provided by DPAS in the dispute in the main proceedings, does not satisfy that criterion.

61Therefore, the question raised by the judgment in AXA UK ³⁶ is whether the Court wished to broaden the concept of a ‘transaction concerning payments or transfers’ so as to include transactions which do not, in themselves, entail the transfer of a sum of money.

62I do not think that was the Court’s intention, for the following reasons. First of all, the Court did not state that its intention was to depart from the case-law in that way in the judgment cited above, but it merely pointed out in summary that the supply at issue constituted, ‘as a matter of principle’, a transaction concerning payments which was exempt, unless it was debt collection or factoring. ³⁷

63Subsequently, it did not establish new criteria by which to define the concept of a ‘transaction concerning payments or transfers’.

64Finally, in the judgments in Bookit ³⁸ and National Exhibition Centre, ³⁹ which were delivered after the judgment in AXA UK, ⁴⁰ the Court confirmed its traditional case-law, based on the criterion of a transfer of a sum of money. As I pointed out in Section A above, ⁴¹ those two judgments are of even greater relevance since, in my view, they concerned the supply of services which were more closely linked to transfers than the supplies at issue in the judgment in AXA UK and in the dispute in main proceedings.

65In the light of the foregoing, I propose that the Court should not apply the solution adopted in the judgment in AXA UK ⁴² to the present case and, therefore, it should hold that a supply of services such as that at issue in the dispute in the main proceedings does not constitute a ‘transaction concerning payments or transfers’ within the meaning of Article 135(1)(d) of the VAT Directive.

C. The identity of the formal recipient of the service is irrelevant for the purposes of applying Article 135(1)(d) of the VAT Directive (second question)

66By its second question, the referring court asks, in essence, whether the supply of services at issue in the dispute in the main proceedings constitutes ‘debt collection’ within the meaning of Article 135(1)(d) of the VAT Directive.

67In my view, there is no need to answer that question, in the light of my proposed answer to the first question referred. An answer is necessary only if the supply at issue falls, in principle, within the scope of the exemption provided for in Article 135(1)(d) of the VAT Directive in so far as it is a ‘transaction concerning payments or transfers’. In those circumstances, the question that arises is whether that supply falls under the exception provided for in respect of debt collection activities.

68Since I am proposing that the Court should answer the question to the effect that the supply at issue in the dispute in the main proceedings does not constitute a ‘transaction concerning payments or transfers’, it is no longer necessary to examine the scope of the exception to that exemption. From a practical point of view, given that my proposed answer to the first question means that that supply is subject to VAT, it is no longer necessary to ask whether it is subject to VAT as a debt collection.

69Nevertheless, I would again mention the relevance, for the purposes of applying the abovementioned exemption, of the fact, set out in the second question referred, that the supply at issue in the dispute in the main proceedings is formally provided by the taxable person (DPAS) to the person from whom the payment is due (the patient) and not to the creditor of that payment (the dentist), following the amendment to the contractual arrangements between those parties.

70I note, in that regard, that, according to settled case-law, consideration of the economic reality is a fundamental criterion for the application of the common system of VAT. ⁴³ In that regard, the Court has expressly accepted the possibility that contractual provisions do not reflect the economic reality of the services performed, on which the application of the VAT system must be based. ⁴⁴

71It is clear from the description of the facts provided by the referring court that DPAS carried out a restructuring of the contractual arrangements implementing its dental payment plans in order to also designate the patient, and not only the dentist, as the recipient of those services. The stated intention of that restructuring was to prevent the part of the services provided to patients from being regarded as ‘debt collection and factoring’ following the judgment in AXA UK ⁴⁵, so that that part remains exempt from VAT. ⁴⁶

72In the context of that restructuring, DPAS maintained, to both dentists and patients, that the economic reality of its supply of services would remain unchanged since the changes were ‘purely administrative’ and made ‘no practical difference to the current arrangements’. ⁴⁷

73In those circumstances, that restructuring of the contractual arrangements, which sought to also designate the patient and not only the dentist as being the recipient of those services, is irrelevant for the purposes of applying Article 135(1)(d) of the VAT Directive. That conclusion follows from the obligation to base the application of the VAT system on the economic reality of the services at issue, in accordance with the case-law cited above.

74To me, that approach also seems to be dictated by Article 131 of the VAT Directive, under which the exemptions provided for, inter alia, in Article 135(1)(d) of that directive, are to apply ‘in accordance with conditions which the Member States shall lay down for the purposes of ensuring the correct and straightforward application of those exemptions and of preventing any possible evasion, avoidance or abuse’. I would point out, in that regard, that it does not seem necessary to me to have recourse to the doctrine of abuse of rights, which is nevertheless well established in the area of VAT, ⁴⁸ since the obligation to take as a basis the economic reality of the transactions in question enables the issue raised by the second question referred to be resolved.

75In the light of the foregoing, I propose that the Court should answer that question as follows: Article 135(1)(d) of the VAT Directive must be interpreted as meaning that the fact that the supply at issue in the dispute in the main proceedings is formally provided by the taxable person to the person from whom the payment is due (the patient) and not to the creditor of that payment (the dentist), following an amendment to the contractual arrangements between those parties, is irrelevant for the purposes of applying the exemption provided for therein since the economic reality of that supply has remained unchanged.

76I would point out that that answer is also relevant should the Court decide to apply the solution adopted in the judgment in AXA UK ⁴⁹ to the present case, contrary to my proposals in Sections A and B above. In my view, should the Court find that a supply of services such as that at issue in the dispute in the main proceedings must be categorised as a ‘debt collection’ transaction (subject to VAT), it would be irrelevant, for the purposes of that categorisation, whether the contractual arrangements at issue in the main proceedings designate the dentist or the patient as being the formal recipient of that supply. The obligation to take as a basis the economic reality of the transactions for the purposes of applying VAT would also preclude, in those circumstances, merely playing around with the wording of the contracts having the ability to change the categorisation of a supply of services even though the economic reality has remained unchanged. ⁵⁰

VI. Conclusion

Conclusion

77In the light of the foregoing, I propose that the Court should answer the questions referred for a preliminary ruling by the Upper Tribunal (Tax and Chancery Chamber) (United Kingdom) as follows:

Article 135(1)(d) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that a supply of services such as that performed by the taxable person in the dispute in the main proceedings, consisting in requesting from the relevant financial institutions, first, that a sum of money be transferred from the patient’s bank account to that of the taxable person pursuant to a direct debit mandate and, second, that that sum be subsequently transferred from the latter account, after deduction of the remuneration due to the taxable person, to the dentist’s and the patient’s insurer’s respective bank accounts, does not constitute a ‘transaction concerning payments or transfers’ which is exempt under that provision since it does not, in itself, result in the legal and financial changes which characterise the transfer of a sum of money.

Article 135(1)(d) of Directive 2006/112 must be interpreted as meaning that the fact that the supply at issue in the dispute in the main proceedings is formally provided by the taxable person to the person from whom the payment is due (the patient) and not to the creditor of that payment (the dentist), following an amendment to the contractual arrangements between those parties, is irrelevant for the purposes of applying the exemption provided for therein since the economic reality of that supply has remained unchanged.

¹ Original language: French.

² Council Directive of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1).

³ Judgment of 28 October 2010 (C‑175/09, EU:C:2010:646).

⁴ Article 13B(d)(3) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1).

⁵ Judgment of 28 October 2010 (C‑175/09, EU:C:2010:646).

⁶ Judgment of 28 October 2010 (C‑175/09, EU:C:2010:646).

⁷ Judgment of 26 May 2016 (C‑607/14, EU:C:2016:355).

⁸ Judgment of 26 May 2016 (C‑130/15, not published, EU:C:2016:357).

⁹ Judgment of 28 October 2010 (C‑175/09, EU:C:2010:646).

¹⁰ Judgment of 5 June 1997 (C‑2/95, EU:C:1997:278, paragraph 53): ‘[A] transfer is a transaction consisting of the execution of an order for the transfer of a sum of money from one bank account to another. It is characterised in particular by the fact that it involves a change in the legal and financial situation existing between the person giving the order and the recipient and between those parties and their respective banks and, in some cases, between the banks. Moreover, the transaction which produces this change is solely the transfer of funds between accounts, irrespective of its cause. Thus, a transfer being only a means of transmitting funds, the functional aspects are decisive for the purpose of determining whether a transaction constitutes a transfer for the purposes of the Sixth Directive [replaced by the VAT Directive].’

¹¹ Moreover, that criterion corresponds with the usual definition of a ‘transfer’ and with the definition set out in Article 4(24) of Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC (OJ 2015 L 337, p. 35), in accordance with which credit transfer means ‘a payment service for crediting a payee’s payment account with a payment transaction or a series of payment transactions from a payer’s payment account by the payment service provider which holds the payer’s payment account, based on an instruction given by the payer’.

¹² Judgments of 26 May 2016, Bookit (C‑607/14, EU:C:2016:355, paragraph 39); of 26 May 2016, National Exhibition Centre (C‑130/15, not published, EU:C:2016:357, paragraph 34); and, to that effect, of 5 June 1997, SDC (C‑2/95, EU:C:1997:278, paragraphs 64 to 66).

¹³ Judgment of 28 October 2010 (C‑175/09, EU:C:2010:646).

¹⁴ Judgments of 5 June 1997, SDC (C‑2/95, EU:C:1997:278, paragraph 53; of 28 July 2011, Nordea Pankki Suomi (C‑350/10, EU:C:2011:532, paragraph 25); of 13 March 2014, ATP PensionService (C‑464/12, EU:C:2014:139, paragraph 79); of 26 May 2016, Bookit (C‑607/14, EU:C:2016:355, paragraph 38); and of 26 May 2016, National Exhibition Centre (C‑130/15, not published, EU:C:2016:357, paragraph 33).

¹⁵ Judgments of 22 October 2015, Hedqvist (C‑264/14, EU:C:2015:718, paragraph 40) and, to that effect, of 12 June 2014, Granton Advertising (C‑461/12, EU:C:2014:1745, paragraphs 37 and 38).

¹⁶ See judgments of 5 June 1997, SDC (C‑2/95, EU:C:1997:278, paragraph 50); of 28 July 2011, Nordea Pankki Suomi (C‑350/10, EU:C:2011:532, paragraph 26); of 26 May 2016, Bookit (C‑607/14, EU:C:2016:355, paragraph 43); and of 26 May 2016, National Exhibition Centre (C‑130/15, not published, EU:C:2016:357, paragraph 38).

¹⁷ See, inter alia, judgment of 2 December 2010, Everything Everywhere (C‑276/09, EU:C:2010:730, paragraph 31).

¹⁸ See, in particular, judgments of 5 June 1997, SDC (C‑2/95, EU:C:1997:278, paragraph 32); of 26 June 2003, MKG-Kraftfahrzeuge-Factoring (C‑305/01, EU:C:2003:377, paragraph 64); of 13 March 2014, ATP PensionService (C‑464/12, EU:C:2014:139, paragraph 78); of 22 October 2015, Hedqvist (C‑264/14, EU:C:2015:718, paragraph 39); of 26 May 2016, Bookit (C‑607/14, EU:C:2016:355, paragraph 36); and of 26 May 2016, National Exhibition Centre (C‑130/15, not published, EU:C:2016:357, paragraph 31).

¹⁹ Judgment of 13 March 2014, ATP PensionService (C‑464/12, EU:C:2014:139, paragraphs 77 to 85). The Court stated that transactions establishing the rights of pension customers vis-à-vis pension funds by transforming the claim held by a worker vis-à-vis his employer into a claim held by that worker vis-à-vis the pension fund of which he is a member constituted ‘transactions concerning payments or transfers’ (paragraph 82 of that judgment).

²⁰ See, to that effect, judgments of 5 June 1997, SDC (C‑2/95, EU:C:1997:278, paragraph 66); of 13 December 2001, CSC Financial Services (C‑235/00, EU:C:2001:696, paragraphs 26 to 28); of 28 July 2011, Nordea Pankki Suomi (C‑350/10, EU:C:2011:532, paragraphs 24 and 28 to 39); of 13 March 2014, ATP PensionService (C‑464/12, EU:C:2014:139, paragraph 79); of 26 May 2016, Bookit (C‑607/14, EU:C:2016:355, paragraphs 40 and 51); and of 26 May 2016, National Exhibition Centre (C‑130/15, not published, EU:C:2016:357, paragraphs 35 and 46).

²¹ Judgments of 5 June 1997, SDC (C‑2/95, EU:C:1997:278, paragraph 65; of 13 December 2001, CSC Financial Services (C‑235/00, EU:C:2001:696, paragraph 32); of 28 July 2011, Nordea Pankki Suomi (C‑350/10, EU:C:2011:532, paragraph 31); of 26 May 2016, Bookit (C‑607/14, EU:C:2016:355, paragraph 45); and of 26 May 2016, National Exhibition Centre (C‑130/15, not published, EU:C:2016:357, paragraph 40).

²² The circumstances of the dispute in the main proceedings must, therefore, be distinguished from those which gave rise to the judgment in ATP PensionService (C‑464/12, EU:C:2014:139). See footnote 19 of the present Opinion.

²³ It is clear from that letter, which is cited by the referring court and of which I have reproduced extracts below, that DPAS provides administrative management services: ‘[Your] monthly Direct Debit is paid through [DPAS], which devised, provides and administers your dental plan using its Direct Debit administrator status. Although in the past, of course, DPAS has had a relationship with you, we, the dental practice, have paid an administration charge to DPAS out of the Direct Debit payment that you made. … From now on, it is proposed … that part of the total monthly Direct Debit amount to be paid by you to DPAS will be retained by DPAS in respect of its obligation to you to manage and administer your dental plan payments and to manage and administer your Supplementary Insurance cover and dental emergency helpline’ (emphasis added). See also points 17 to 19 of the present Opinion.

²⁴ Judgment of 26 May 2016 (C‑607/14, EU:C:2016:355).

²⁵ Judgment of 26 May 2016 (C‑130/15, not published, EU:C:2016:357).

²⁶ Judgment of 28 October 2010 (C‑175/09, EU:C:2010:646).

²⁷ Judgments of 26 May 2016, Bookit (C‑607/14, EU:C:2016:355, paragraph 44), and National Exhibition Centre (C‑130/15, not published, EU:C:2016:357, paragraph 39).

²⁸ See, to that effect, judgments of 26 May 2016, Bookit (C‑607/14, EU:C:2016:355, paragraphs 45 to 51), and National Exhibition Centre (C‑130/15, not published, EU:C:2016:357, paragraphs 40 to 46).

²⁹ See, to that effect, judgments of 26 May 2016, Bookit (C‑607/14, EU:C:2016:355, paragraphs 53 to 56), and National Exhibition Centre (C‑130/15, not published, EU:C:2016:357, paragraphs 48 to 51).

³⁰ Judgments of 19 April 2007, Velvet & Steel Immobilien (C‑455/05, EU:C:2007:232, paragraph 22); of 22 October 2009, Swiss Re Germany Holding (C‑242/08, EU:C:2009:647, paragraph 46); of 12 June 2014, Granton Advertising (C‑461/12, EU:C:2014:1745, paragraph 29); of 13 March 2014, ATP PensionService (C‑464/12, EU:C:2014:139, paragraph 78); of 22 October 2015, Hedqvist (C‑264/14, EU:C:2015:718, paragraph 37); of 26 May 2016, Bookit (C‑607/14, EU:C:2016:355, paragraph 36); and of 26 May 2016, National Exhibition Centre (C‑130/15, not published, EU:C:2016:357, paragraph 31).

³¹ Judgments of 19 April 2007, Velvet & Steel Immobilien (C‑455/05, EU:C:2007:232, paragraph 24); of 10 March 2011, Skandinaviska Enskilda Banken (C‑540/09, EU:C:2011:137, paragraph 21); of 12 June 2014, Granton Advertising (C‑461/12, EU:C:2014:1745, paragraph 30); of 22 October 2015, Hedqvist (C‑264/14, EU:C:2015:718, paragraph 36); of 26 May 2016, Bookit (C‑607/14, EU:C:2016:355, paragraph 55); and of 26 May 2016, National Exhibition Centre (C‑130/15, not published, EU:C:2016:357, paragraph 50).

³² Judgment of 28 October 2010 (C‑175/09, EU:C:2010:646).

³³ See point 12 of the present Opinion.

³⁴ See points 16 to 19 of the present Opinion.

³⁵ Judgment of 28 October 2010 (C‑175/09, EU:C:2010:646).

³⁶ Judgment of 28 October 2010 (C‑175/09, EU:C:2010:646).

³⁷ Judgment of 28 October 2010, AXA UK (C‑175/09, EU:C:2010:646, paragraph 28).

³⁸ Judgment of 26 May 2016 (C‑607/14, EU:C:2016:355).

³⁹ Judgment of 26 May 2016 (C‑130/15, not published, EU:C:2016:357).

⁴⁰ Judgment of 28 October 2010 (C‑175/09, EU:C:2010:646).

⁴¹ See points 47 to 51 of the present Opinion.

⁴² Judgment of 28 October 2010 (C‑175/09, EU:C:2010:646).

⁴³ Judgments of 20 February 1997, DFDS (C‑260/95, EU:C:1997:77, paragraph 23); of 28 June 2007, Planzer Luxembourg (C‑73/06, EU:C:2007:397, paragraph 43); of 7 October 2010, Loyalty Management UK and Baxi Group (C‑53/09 and C‑55/09, EU:C:2010:590, paragraph 39); and of 20 June 2013, Newey (C‑653/11, EU:C:2013:409, paragraph 42).

⁴⁴ See, in particular, judgment of 20 June 2013, Newey (C‑653/11, EU:C:2013:409, paragraph 44).

⁴⁵ Judgment of 28 October 2010 (C‑175/09, EU:C:2010:646).

⁴⁶ See points 16 to 19 of the present Opinion.

⁴⁷ See points 18 and 19 of the present Opinion.

⁴⁸ See, inter alia, judgments of 21 February 2006, Halifax and Others (C‑255/02, EU:C:2006:121, paragraphs 74 and 75); of 17 December 2015, WebMindLicenses (C‑419/14, EU:C:2015:832, paragraphs 35 and 36); and of 22 November 2017, Cussens and Others (C‑251/16, EU:C:2017:881).

⁴⁹ Judgment of 28 October 2010 (C-175/09, EU:C:2010:646).

⁵⁰ See point 72 of the present Opinion.