Story Terrace Limited v The Commissioners for HMRC

Introduction

1. The Appellant appeals against the part of HMRC’s review decision of 21 August 2023 (the ‘Review Decision’), which upheld HMRC’s VAT liability ruling of 6 July 2023 for the Appellant’s 3/23 VAT return (the ‘Liability Decision’).

2. The Appellant says that it is making zero-rated supplies of books for the purposes of Value Added Tax Act 1994 (‘VATA’). HMRC say that the Appellant is making standard-rated supplies of ghost-writing services for the purposes of VATA.

3. The issue of quantum was not before us.

4. For the reasons given below the appeal is upheld. preliminary matters Documents and evidence

5. For the hearing we were provided with a hearing bundle of 1054 pages, a supplementary hearing bundle of 435 pages, an authorities bundle of 856 pages and various samples of the Appellant’s products. We were asked to watch a number of online videos which we did. During the hearing a further authority, another HMRC VAT manual and some corrections to one of the transcripts in the hearing bundle were handed up. Mr Rutger Bruining a director of the Appellant and Officer Angela Seymour of HMRC both provided witness statements and were cross examined. Parties' submissions

6. We are grateful to Mr Brodsky and Mr Hickey for their skeleton arguments, submissions, and willingness to engage with our questions and to the witnesses for their evidence. We set out below our summary of those submissions on the law and the facts. The parties should, however, be assured that when preparing this decision, the terms of the skeletons were reread and our notes of the hearing reviewed. Because we do not deal specifically with any point it does not mean that it was not considered in the round when reaching our decision. the issues and burden and standard of proof The issues

7. The issue in this appeal is whether, as the Appellant says, its supplies are of books and therefore are zero-rated for the purposes of VATA. Or whether the Appellant is making standard-rated supplies of ghost-writing services for the purposes of VATA.

8. It was common ground that the Liability Decision affected other periods and that the issue of quantum was not before us. Burden and standard of proof

9. It is for the Appellant to show that its supplies are zero rated.

10. The standard of proof is on the balance of probabilities. the law

11. If a supply of goods or services is zero-rated no VAT is charged on that supply. However, it is in all other respects treated as a taxable supply, see s30(1) VATA.

12. A supply of goods or services is zero-rated if it meets the description in Schedule 8 VATA, see s30(2) VATA. Item 1 Group 3 Schedule 8 VATA (‘Item 1’) provides: Books, booklets, brochures, pamphlets and leaflets. Item 7 Group 3 Schedule 8 VATA zero-rates publications listed in Item 1 when supplied electronically subject to non-relevant exceptions.

13. s6 European Union (Withdrawal) Act 2018 (‘EUWA’) provided in relevant part at the relevant time: 6 Interpretation of retained law (1) A court or tribunal— (a) is not bound by any principles laid down, or any decisions made, on or after IP completion day by the European Court, and (b) cannot refer any matter to the European Court on or after IP completion day. (2) Subject to this and subsections (3) to (6), a court or tribunal may have regard to anything done on or after IP completion day by the European Court, another EU entity or the EU so far as it is relevant to any matter before the court or tribunal. IP completion day was 31 December 2020, see s1 A(6) EUWA and s39(1) European Union (Withdrawal Agreement) Act 2020 . the facts Preliminary points

14. The Tribunal heard oral evidence from Mr Bruining and Officer Seymour. Mr Bruining’s three written witness statements stood as his evidence-in-chief and were for the most part unchallenged. Mr Bruining was cross-examined, however the focus of the cross examination was not the accuracy of what he said or the veracity of various documents he exhibited to his witness statement. Rather the cross-examination focussed on whether the various documents undermined the Appellant’s case, that is a matter for us to determine primarily by reference to those documents and not the views of Mr Bruining. Officer Seymour’s witness statement stood as her evidence in chief and was largely unchallenged. Officer Seymour was also cross examined. Both Mr Bruining and Officer Seymour answered questions in a straightforward manner and stated clearly what they did not know. We found both witnesses to be honest and credible.

15. We set out the majority of our findings of fact in this part of our decision. A lot of our findings of fact are from the documents supplied or the largely unchallenged evidence of Mr Bruining and Officer Seymour. Consequently, most of them require no discussion as they were not in dispute. Where they were in dispute we provide the reasons for our findings below. Therefore, we have also incorporated Mr Bruining’s and Officer Seymour’s evidence in the findings of fact below rather than setting out the evidence provided.

16. The Appellant did not adduce any written or oral evidence from a ghost-writer. Consequently, HMRC invited us to draw an adverse inference as to the low-level role of the ghost-writers contracted by the Appellant in line with the First-tier Tribunal’s recent approach at [259] – [260] in Minstrell Recruitment Ltd & Ors v Revenue & Customs [2024] UKFTT 82 (TC) applying Royal Mail Group Ltd v Efobi [2021] 1 WLR 3863 at [41]. However, we decline to draw such an inference for the reasons put forward by Mr Brodsky: the relevant test in this appeal involves the objective view of a typical consumer and not the subjective view of a particular ghost-writer; also there is no factual dispute about what the ghost-writers provide; and we do not see that such evidence would be relevant to the determination of this appeal. Therefore, we do not consider that the context or particular circumstances of this appeal means that positive significance should be attached to the lack of evidence from any of the ghost-writers the Appellant contracts with. The Appellant’s business and process

17. The Appellant is a limited company and was incorporated in 2014. It is now in administration. The Appellant is VAT registered.

18. The business of the Appellant is very important personally to Mr Bruining who is a director of the Appellant. Mr Bruining was inspired to set up the Appellant’s business after he found that details of his grandfather’s stories faded with time: Mr Bruining clearly had a remarkable grandfather. It was always a key element of Mr Bruining’s vision that the Appellant would produce books so that there was a physicality to the end-product: something that could be picked up and read at any time and that would become part of family history in a way that text existing on a computer would not.

19. The Appellant’s press factsheet describes its company mission: …..to turn 1 million life stories into books using professional ghost writers by 2028.

20. On the Appellant’s website: (1) Mr Bruining is quoted as saying that the premise that the Appellant is based on is “ a biographer for every person” . (2) In the FAQ section the response to the question “Will you write my book in exchange for royalties?” The answer is “[The Appellant] is a paid ghost-writing service”. (3) It states “No matter how unique your story is, we’ll match you with the perfect writer”. (4) There are numerous further references to ghost-writing and experienced ghost-writers.

21. The Appellant’s customers engage the Appellant via its website. The website sets out 8 steps for creating one of the Appellant’s products , as follows: See below for our factual finding that the Appellant’s products are books. For ease we refer to the Appellant’s products as books from this point. (1) The first step is a welcome letter explaining the process. Complete and Novella package buyers (see below) also receive a gift pack that includes a luxury pen and notebook. We refer to this as ‘Step 1’. (2) Next the customer’s personal editor explains the process and sets up a book production schedule (expected to be 7 months). We refer to this as ‘Step 2’. See also below re further details of this conversation. (3) The personal editor then matches the customer with a ghost-writer, who considers “your book goals, background, personality and location”. We refer to this as ‘Step 3’. Customers generally accept the first ghost-writer proposed. (4) The customer then completes a questionnaire which provides a structure for the interviews. There is an option to purchase an additional interview session instead of completing the questionnaire. We refer to this as ‘Step 4’. (5) This step involves the in-depth interview sessions which form the backbone of the customer’s story. Interviews can be in person or held remotely. There may be more than one interview if the customer’s package includes more than two hours of interview time. Interviews are with the ghost-writers. We refer to this as ‘Step 5’. (6) Following the interview(s) the ‘book’ is written by the ghost-writer in stages involving a story outline, a draft sample of a chapter and concluding with a draft of the entire story. At each stage the draft is sent to the customer for approval. We refer to this as ‘Step 6’. (7) ‘Step 7’ involves the use of the Appellant’s ‘Bookmaker’ platform to upload photos. The customer can then choose in which chapters of the book the photos feature. The customer also designs the book cover at this stage using one of the Appellant’s templates or their own design. (8) The final step is the Appellant’s designers laying out the book’s cover and interior. The customer signs off the PDF proofs before the book goes to print. We refer to this as ‘Step 8’.

22. The Appellant’s website also sets out three different levels of package that a customer can buy in ascending price order: (1) The ‘Compact Package’ (2) The ‘Complete Package’ (3) The ‘Novella Package’ At the bottom of each pricing option the customer is invited to “select book”. The differences in the three packages are the numbers of pages (in total and the number of pages of text), the number of words, the number of photos, the number of hours of interview and the level of writer (junior, senior or premium) that comes as standard as set out below. Length of book (all hardback) Hours of interview Pages/words Photos Level of writer Compact £1,950 55 – 60 4 33 pages of text 7,500 words Up to 20 Junior as standard Senior +£350 Premium +£700 Complete £3,650 80 – 90 6 55 pages of text 12,500 words Up to 30 Senior as standard Premium +£550 Junior - £550 Novella £6,450 115 – 125 10 90 pages of text 20,000 words Up to 40 Premium as standard Senior - £1,000 Junior – not available with Novella

23. All packages have dedicated editorial sessions (not with the ghost-writers which include proof-reading and input into the shape of a customer’s narrative), a project length of 7 months and the customer ultimately receives 4 colour hardback books and a digital copy of the book.

24. The hearing bundle contained a call script for the Appellant’s customers. The project editor calls the customer and explains the processes entailed in the production of the book: describing the project editor’s role including: management of the ghost-writer, the proofreader, the Bookmaker design team and the printer; how writer matching works; confirmation/clarification of project goals; the basic seven month project plan; and next steps. We accept the Appellant’s point that there is more than simply the ghost-writing that goes into the production of the books.

25. Mr Bruining also gave uncontested evidence that in various communications with its customers the Appellant focussed on the offerings of books: new leads receive an email saying “Very exciting that you are looking at creating this book”; after purchase the welcome email explains that the project editor is the point of contact for the “book-making process”; an email that explains that a project editor has been assigned explains the elements involved in “delivering the book”.

26. The Appellant’s website does not provide an option for the text alone or the services of a ghost-writer only. Mr Bruining’s view was that the Appellant did not compete with stand-alone ghost-writing services because in comparison, following some basic research, a freelance ghost-writer’s fees for providing the text that would appear in one of the Appellant’s books would be 3 – 6 times less than the Appellant would charge for one of its books.

27. The Appellant’s website offers a number of ‘additional services’ distinct from that set out above. For the purposes of this appeal it is sufficient to find that the ‘Editing Services’ and ‘StoryTerrace Pro’ involve ghost-writing.

28. The Appellant’s customers spend an average of 4.5 times longer on the book than the ghost-writer.

29. The Appellant spent over £900,000 building its software, ‘Bookmaker’. Bookmaker is important to the Appellant as it allows it to create books efficiently at scale. The Appellant’s customers use Bookmaker to: (1) Fill in their questionnaire. (2) Upload their photos, caption them and allocate them to specific chapters. (3) Work on their outline and text in collaboration with a professional. (4) Experiment with and choose a cover. (5) Generate and check the design proofs before sending the book off for printing and delivery.

30. The editors are employed by the Appellant, but the ghost-writers are not.

31. HMRC also invited us to view, which we did, publicly available videos entitled ‘StoryTerrace Swift Webinar’ and ‘Talk: Capture your life story in a book’. HMRC said they supported its position because they emphasised: the Appellant’s access to a large bank of quality and experienced ghost-writers who enjoy what they do; the skill of the ghost-writers in capturing the emotion of the Appellant’s customers; and the biography aspect of the Appellant’s supplies. Further, the second video included in its description ‘#ghostwriter’.

32. The role of the ghost-writers is clearly an important aspect of the Appellant’s business: in his oral evidence Mr Bruining said that the ghost-writers played an important role in the creation of the books and that was a fact. Mr Bruining did not seek to suggest otherwise. The contract

33. The Appellant’s contract with its customers is set out in an annex to this decision (the ‘Contract’). No submissions were made that it also applied to the ‘additional services’. We discuss the clauses relied upon by the parties below. The relative cost of the ghost-writers – proportion of the price paid by customers

34. In response to a request from HMRC Mr Bruining provided his second witness statement (dated 24 April 2025). That statement sets out how much the ghost-writers were paid by the Appellant compared to the price paid by the customer for 4 projects chosen by HMRC. The relevant figures are: Total charged to customer Total paid to ghost-writer % £6,600 £2,000 30 £6,250 £1,600 26 £5,650 £1,600 28 £5,530 £1,600 29 In his second witness statement Mr Bruining confirmed that these figures were within the range of the Appellant’s business model at the time: to pay the ghost-writers between 20 – 30% of the price paid by the customer for the books depending on the package sold. The relative cost of the ghost-writers – the proportion of the Appellant’s direct costs

35. Mr Bruining and Mr Theo Branning (the Appellant’s Marketing Director) appeared on the well-known TV programme Dragon’s Den. During that appearance Mr Branning said: So, if you take an average sale of £3,300, then we have about £1,300 direct costs, most of which is going on the writer. It would leave us with £1,500 basically afterwards. Tej Lalvani (a ‘Dragon’) commented that this was a 50% gross margin and Mr Branning said “yeah”. HMRC’s skeleton argument highlighted that Mr Branning had said that most of the cost went on the writer. It also utilised the 50% gross margin figure and the figures from the 4 projects above to calculate the ghost-writers’ fees as 57% of the Appellant’s direct costs.

36. HMRC’s calculations prompted Mr Bruining’s third witness statement (19 May 2025). By reference to the Appellant’s profit and loss figures for 2023 Mr Bruining’s evidence was that the ghost-writers’ fees were 29% of the Appellant’s direct costs (excluding sales and marketing, and non-operating costs). In oral evidence Mr Bruining explained that the profit and loss figures were not retrieved by him, were unaudited and were not exact because of the Appellant being in an insolvency process. He did explain however that he had checked the figures line by line. Mr Hickey did cross-examine Mr Bruining on some of the figures but that did not in our view result in a successful challenge to the headline figures provided by Mr Bruining nor did Mr Hickey submit that it did in closing. We do not consider that Mr Bruining’s evidence regarding percentage of direct costs is necessarily undermined by his earlier evidence (regarding percentage of the cost charged to the Appellant’s customers) or HMRC’s calculations. That is because Mr Bruining’s earlier evidence related to a much smaller sample size. In relation to HMRC’s calculations, again they are based on a small sample size where each sale was in excess of £5,530 and utilises broad comments made in a television programme about average sales of £3,300. Therefore, we accept that during 2023 the ghost-writers’ fees were 29% of the Appellant’s direct costs (excluding sales and marketing, and non-operating costs). Other evidence

37. The hearing bundle contained 227 pages of online reviews of the Appellant’s service. Mr Brodsky said that they showed the importance to the Appellant’s customers of the book and Mr Hickey said that they showed the importance of the ghost-writers/ghost-writing services to the Appellant’s customers. If such reviews were relevant, to the view of the typical consumer, we do not consider that we can draw a meaningful conclusion from them that supports either party’s case. That is because on the basis of how they were presented to us it was clear that either party could select the reviews that they said supported their case. Neither party provided any in-depth analysis of the reviews such that we could reach a sensible conclusion on whose case they supported. Therefore, we do not find any facts in relation to them and they do not form part of our decision.

38. We explained above that Mr Bruining and Mr Branning pitched the Appellant’s business on Dragons’ Den. Mr Brodsky sought to argue that the Dragons’ reactions supported the Appellant’s case. Like the point we make about the online reviews, if it was right to consider these reactions in principle when determining the view of the typical consumer, we do not consider that these are helpful in this appeal. That is because they are made at a point when all the Dragons have seen is the book and not once they had heard the detail of the Appellant’s supply. outline of the parties’ arguments The Appellant’s case

39. The Appellant’s case is that its supplies are within Item 1 and fall to be zero-rated i.e. it supplies books for the reasons that follow.

40. The Appellant’s end product is a book for the purposes of Item 1.

41. Applying the relevant test (see below), the predominant element of the Appellant’s supply is of a book. That is because: (1) The focal point of offering to the Appellant’s customers is a book. (2) The ‘theme’ of the terms and conditions between the consumer and the Appellant focuses on the end result which is 4 full colour hardbacks and a digital copy of the customer’s book. The Appellant makes the same point about the introductory call script (discussed above). (3) The reactions of the ‘Dragons’ in Mr Bruining’s appearance on Dragon’s Den reflect the dominant impression given to consumers that the Appellant is supplying a book. (4) The ghost-writing element of the Appellant’s supply is not a means to an end and is not available separately from the Appellant. Further if a typical consumer was looking for ghost-writing services they would not look to the Appellant for them because it would cost 3 – 6 times more to create and print a book with the Appellant than it would to hire a freelance ghost-writer to provide the text that appears in the Appellant’s books.

42. The Appellant says that the principal/ancillary test (see below) does not apply to the facts of this appeal. HMRC’s case

43. HMRC say the Appellant makes a single supply of ghost-writing services which falls to be standard-rated because: (1) The evidence ‘in the round’, in particular the contracts, the customer reviews, the additional services offered (insofar as they also included ghost-writing) and the pricing structure shows that the ghost-writing service is the predominant element of the Appellant’s supply. (2) The overall tenor of the Appellant’s website makes it clear that the Appellant is providing a personalised package of services which includes a few copies of a printed book. The Appellant conducts the research, writing and design which are all standard-rated services. (3) Item 1 precludes zero-rating of supplies which arise in consequence of the supplier providing a bespoke service. (4) Alternatively, HMRC say that the supply of the ghost-writing service is the principal element of the Appellant’s supply. discussion and findings Does the Appellant’s end product meet the definition of a book?

44. HMRC’s Statement of Case put the Appellant to proof as to whether its final outputs were books. We were provided with samples of the Appellant’s end product. They all had a significant number of leaves held together with front and back covers more substantial than the leaves and therefore met the minimum characteristic of a book as required by Customs and Excise Commissioners v Colour Offset Ltd [1995] STC 85 . There was no suggestion from HMRC that the samples we had were not representative of the Appellant’s supplies and therefore we find that the Appellant’s final outputs are books. Characterisation of ‘Levob’ single supplies

45. It is well established that where a transaction comprises a bundle of elements and acts it falls to be determined whether there are two or more distinct supplies or whether there is a single supply for VAT purposes. In this appeal it was common ground that the supplies by the Appellant to its customers are single supplies for VAT purposes. We agree with the Appellant that this position was consistent with the principles set out by the Upper Tribunal in Middle Temple v HMRC [2013] STC 1998 , at [60].

46. For the purposes of this appeal the there are two relevant circumstances where one or more supplies may be considered a single supply. In this case the parties proceeded on the basis that the relevant type of single supply was a Levob Verzekeringen BV v Staatssecretaris van Financiën ( Case C-41/04 ) [2006] STC 766 (‘ Levob’ ) type of single supply. We do not see any reason to disturb that approach. Consequently, we do not consider it necessary to address HMRC’s criticisms of the part of the Appellant’s skeleton argument that analysed why the Appellant’s supply was a Levob type of supply.

47. Levob concerned the supply of customised software. The cost of the basic software was distinct in the contract from the cost of the customisation. The issue before the ECJ (as it then was) was whether there had been separate supplies of the basic software and the customisation. At [30] the ECJ stated: - Article 2(1) of the Sixth Directive must be interpreted as meaning that where two or more elements or acts supplied by a taxable person to a customer, being a typical consumer, are so closely linked that they form objectively, from an economic point of view, a whole transaction, which it would be artificial to split, all those elements or acts constitute a single supply for purposes of the application of VAT; - this is true of a transaction by which a taxable person supplies to a consumer standard software previously developed, put on the market and recorded on a carrier and subsequently customises that software to that purchaser's specific requirements, even where separate prices are paid; - Article 6(1) of the Sixth Directive must be interpreted as meaning that such a single supply is to be classified as a 'supply of services' where it is apparent that the customisation in question is neither minor nor ancillary but, on the contrary, predominates; such is the case in particular where in the light of factors such as its extent, cost or duration the customisation is of decisive importance in enabling the purchaser to use the customised software. The first paragraph sets out what constitutes a ‘Levob’ type of single supply. The third paragraph confirms that how a ‘Levob’ type of single supply is characterised depends on whether the supply has a feature that predominates.

48. The application of Levob and subsequent CJEU case law was recently considered in Gray & Farrar International LLP v HMRC [2023] EWCA Civ 121 ( ‘Gray & Farrar’ ). Gray & Farrar concerned, in summary, the VAT treatment of the supplies made by ‘matchmakers’. Following its conclusion at [47] that the predominant test was the primary test for characterising a single supply, the Court of Appeal at [49] – [51], clarified the hierarchy of tests: 49 In MIS [2017] STC 2523 , Mann J and UT Judge Ashley Greenbank reached the same conclusions and found that there was a hierarchy of tests to be applied in characterising a single supply for VAT purposes. They described it as follows at para 78: (1) The Město predominance test should be the primary test to be applied in characterising a supply for VAT purposes. (2) The principal/ancillary test is an available, though not the primary, test. It is only capable of being applied in cases where it is possible to identify a principal element to which all the other elements are minor or ancillary. In cases where it can apply, it is likely to yield the same result as the predominance test. (3) The ‘overarching’ test is not clearly established in the ECJ jurisprudence, but as a consideration the point should at least be taken into account in deciding averments of predominance in relation to individual elements, and may well be a useful test in its own right. 50 I respectfully endorse that approach. 51 Accordingly, for these reasons, the UT was correct in this case to hold that if the predominant element can be applied, it should be. It is the primary test. The first ground of appeal therefore fails.

49. Discussing the application of the predominance test the Court of Appeal, in Gray & Farrar at [41] – [42], also usefully sets out the pertinent extract from Město Zamberk v Financni reditelstvi v Hradci Kralove ( Case C-18/12 ) (‘ Město ’) and its conclusions on how to apply the predominance test: 41 The predominant element test is most clearly identified in Město [2014] STC 1703 . The context was services supplied by an aquatic centre and whether they fell within a VAT exemption for “the supply of certain services closely linked to sport or physical education” (within article 132(1)(m) of the Principal VAT Directive which is an exemption). Two types of facility were supplied: sporting facilities such as a swimming pool divided into lanes, a beach-volleyball court and table tennis; and recreational facilities including a paddling pool, waterslides and a natural river for swimming. The CJEU referred to Levob where the predominant element test was used in the context of supplies of standard software that was customised to meet the customer’s business needs, to identify whether, if this was a single supply, it was a supply of goods or a supply of services, and if a supply of services, where those services were supplied. At paras 29 and 30 the CJEU in Město held: “29. In order to determine whether a single complex supply must be categorised as a supply closely linked to sport within the meaning of article 132(1)(m) of the VAT Directive although that supply also includes elements not having such a link, all the circumstances in which the transaction takes place must be taken into account in order to ascertain its characteristic elements and its predominant elements must be identified (see, to that effect, in particular, Faaborg-Gelting Linien A/S v Finanzamt Flensburg ( Case C-231/94 ) [1996] STC 774 ; [1996] ECR I-2395, paras 12 and 14; Levob Verzekeringen , para 27; and Bog [Finanzamt Burgdorf v Bog ( Case C-497/09 ) [2011] STC 1221 ], para 61).

30. It follows from the case law of the court that the predominant element must be determined from the point of view of the typical consumer (see, to that e›ect, in particular, Levob Verzekeringen , para 22, and Everything Everywhere Ltd (formerly T-Mobile (UK) Ltd) v Revenue and Customs Comrs ( Case C-276/09 ) [2011] STC 316 ; [2010] ECR I-12359, para 26) and having regard, in an overall assessment, to the qualitative and not merely quantitative importance of the elements falling within the exemption provided for under article 132(1)(m) of the VAT Directive in relation to those not falling within that exemption (see, to that e›ect, Bog, para 62).” 42 The language used by the CJEU suggests that this is a mandatory requirement. The exercise is an objective one. The view of the typical consumer, determined by reference to objective factors, is critical. The question is what is the predominant element in what the typical consumer thinks he or she is acquiring. An overall assessment must be made of all elements of the supply to determine their importance to the typical consumer, both qualitatively and quantitatively, to decide which predominates.

50. Having applied the predominance test to the facts of the case and commented on the First-tier Tribunal’s and the Upper Tribunal’s approach at [60] and [61], at [64] the Court of Appeal warns against artificially splitting single supplies when applying the predominance test: The approach adopted by both the FTT and the UT involved an artificial dissection of the introduction service supplied by G&F of a kind warned against by the CJEU. To treat this service as comprising two distinct components, the provision of expert (consultancy) advice and the provision of information, was an error of approach. It did not reflect the economic or commercial reality of the transaction. Just as the characterisation of the supply of education with a view to a qualification is not to be determined by dissecting the single service into its component parts and then deciding whether the books and printed matter or the lectures and teaching predominates, there is no basis for thinking that the typical consumer using G&F’s service would view the G&F service as supplying advice and/or providing information. That is not what is contracted for.

51. To emphasise the Court of Appeal’s warning Mr Brodsky took us to the both the Attorney General’s opinion at [25] – [28] and the CJEU’s decision at [39] – [40] in Case C-581/19 Frenetikexito – Unipessoal Lda v Autoridade Tributária e Aduaneira ( ‘Frenetikexito’ ). Determining whether we wish to accept Mr Brodsky’s submission would require some detailed discussion of Frenetikexito . We decline to undertake that discussion in this appeal for a number of reasons. First, Frenetikexito was decided in 2021 which was after IP completion day. This means that the CJEU’s decision is not binding on us although we may take it into account, see s6 EUWA. We also note that the CJEU’s endorsement of the Attorney General’s analysis clearly relates to the comments made about the classification of supplies as single or multiple and not the characterisation of the supply. That is not surprising as that was the issue before the Court but that is not the issue before us. Finally, we have the above binding guidance from the Court of Appeal which follows from a discussion of the relevant characterisation test in Město (which in any event the Advocate General’s opinion did not disagree with).

52. We do not understand that the overall assessment required by Město precludes an awareness/identification of all aspects of a supply. However, such an assessment should not entail identifying distinct components of a supply (which may bundle together aspects of a supply) and then deciding which predominates.

53. HMRC say that the majority of the elements of the transaction at issue (such as Steps 3 – 6 above) are all closely linked to form a single supply of a ghost-writing service. Further, that from the perspective of a typical consumer they receive ghost-writing services and a book. HMRC conclude that the supply of the ghost-writing service is the predominant element. In our view this approach starts with the dissection of the Appellant’s supply in the way that the Court of Appeal warned against (although that does not preclude us from considering the factors that HMRC put forward for the overall assessment). Instead, our approach is to answer the question what is the predominant element in what the typical consumer thinks he or she is acquiring? By making an overall assessment of all elements of the supply to determine their importance to the typical consumer, both qualitatively and quantitatively, we can then decide which predominates. Application of the ‘predominance test’

54. Gray & Farrar at [56] – [57] rehearses the authority for the proposition that normally the starting point for the characterisation of a transaction/supply for VAT purposes which is governed by a written agreement is the written agreement itself. Therefore, we start by considering the Contract.

55. Turning to the Contract as set out in the Annex to our decision (all references to clauses that follow are to those in the Contract), we find as fact that these were the terms and conditions at the material time. We also find that Steps 1 – 8 above and the three different levels of package described above formed part of the Contract between the Appellant and its customers by virtue of Clause 12 (the definition of goods and services). The parties drew our attention to which clauses in the Contract they relied on.

56. In relation to the Contract the Appellant says its purpose is the provision of a book: (1) The Contract obliges the Appellant to provide a book, see Clauses 12 and 8. (2) The book is described as the ‘final output’ , see Clause 5. Further, the book is an outcome of a creative process i.e. there is not a creative process for its own sake, see Clause 18. (3) The Contract recognises that the books are custom-made, see Clause 20. (4) Its target is to produce a book. That is because in default of contact from the customer, 30 days after providing proofs the book will be sent to print, see Clause 26. Further, the books must if printed conform to industry standards, see Clauses 71 – 73. The point being that the Contract will not be performed if the book is not of sufficient quality. (5) Clauses 15 and 21 identify the editors and designers as distinct from the ghost-writers. (6) Clause 28 demonstrates how important it is to consumers that the books are properly proof-read. (7) The Appellant is permitted to replace the ghost-writer if the original writer cannot proceed, see Clause 31. Mr Brodsky’s point was that if you are buying ghost-writing services then identity is paramount. (8) A contract for the provision of ghost-writing services would not include Clauses 5 and 71 – 73.

57. In relation to the Contract HMRC say: (1) The Contract makes it clear that the Appellant is providing a personalised package of services which includes a printed book. Further, a number of the personalised services are standard-rated. (2) It is clear that the Appellant’s supply is a bespoke service. The books contain original content and are not generally intended for the public but for the Appellant’s customer’s private use. Additionally, copyright initially rests with the Appellant and its Customers, although this is subject to an option whereby customers are able to obtain the copyright in the books. See Clauses 20 and 44 - 49. (3) It is clear that the ghost-writing is part of the Appellant’s service. (4) The standard seven month project process differentiates from the usual instant supply of a book, see Clause 15. (5) The price the Appellant’s customers pay depends on the seniority of the ghost-writer, see above.

58. HMRC are right to say that aspects of the Appellant’s supply would be standard-rated if they were supplied on their own but that is not a barrier to a conclusion that the Appellant’s supply is zero-rated. Case law and HMRC notices relied upon by the parties Bespoke/customised supplies case law

59. It is clear and not in dispute that the books produced under the terms of the Contract are bespoke, see Clause 20. The parties made a number of arguments in light of this fact.

60. Mr Brodsky took us to the First-tier Tribunal’s decision in Harrier v HMRC [2011] UKFTT 725 (TC) (‘ Harrier ’). Harrier considered whether the supply of personalised photobooks should be zero-rated pursuant to Item 1. Mr Brodsky’s point was that simply because a product is customised or bespoke does not mean that the supply of the customisation service is predominant. Mr Hickey took us to the facts in Harrier at [8] – [15] to make clear that the facts of Harrier are clearly distinguishable from the facts of this appeal. In particular, there was no assistance from Harrier in laying out the photobooks nor the provision of anything akin to the ghost-writing service provided by the Appellant. Having identified at [32] that Levob was the relevant authority as to how to classify the supply in the case the First-tier Tribunal concluded at [34]: This is not a case, unlike Levob, where an existing product was customised to such an extent that the customisation service dominated. Here what Harrier does is provide a product, which it produces to a customer specification. That supply of the product itself is the predominant supply, and the composite supply by Harrier is accordingly a supply of goods. We agree with both Mr Brodsky and Mr Hickey’s points: a customisation service is not automatically the predominant element of a supply; and whilst it can be useful to consider other characterisation cases, ultimately the characterisation of VAT supplies is a very fact sensitive issue. Other case law

61. This is a useful juncture to note that we were referred to a number of other cases that considered the determination of whether there was a single or multiple supply (which is not the issue before us) and/or the characterisation of single supplies (including Paragon Customer Communications v HMRC [2018] UKFTT 162, Faaborg-Gelting Linien v Finanzamt Flensburg (C-231/94) (‘ Faaborg ’), David Baxendale v HMRC [2009] EWCA Civ 831 , HMRC v Weight Watchers (UK) Limited [2008] EWCA Civ 715 , HMRC v Metropolitan International Schools Ltd [2017] UKUT 431 and College of Estate Management v HM Customs and Excise [2005] UKHL 62 ). We were asked to draw analogies between these decided case and the facts of this appeal. We take from Faaborg the point that the existence of an end product in a supply that involves a number of elements does not necessarily render the characterisation of that supply as a supply of that product. However, generally we make the same point as above: in terms of applications of the relevant principles to the facts, these cases very much turn on their facts and the present case is clearly distinguishable. VAT Notice 701/10

62. A point of dispute between the parties arose in relation to HMRC’s notice Zero-rating books and printed matter (VAT Notice 701/10) which provides at 7.2 that original or specialist items are standard-rated. The dispute flowed from what was meant in that notice by original or specialist items. However, it is uncontroversial to say that such a notice is not the law (which we have set out above) it is HMRC’s view of the law. Accordingly, and with respect to the submissions made by both parties, we do not derive any assistance from the notice in reaching our decision and so do not address the parties’ detailed arguments on it. Arguments in light of the copyright position

63. Following on from the copyright position, HMRC invited us to consider what the Appellant’s customers would receive if they had not received the ghost-writing service. Again, with respect that is not the question prescribed by the law set out above and so we do not find it necessary to consider it. Substantive analysis of the Contract

64. Both parties took us to Clause 12 (the definition of goods and services) which encompasses all aspects of the Appellant’s supply and is buttressed by Clause 8 (the definition of the contract). In our view the inclusion of ‘the number’ in Clause 12 emphasises the importance of the books: the words could be removed from Clause 12 and the Contract would still have the same effect given the definition of order in Clause 13. This emphasis is repeated by the fact that book has its own definition in Clause 5 which also describes the book as the ‘final output’, there is no mirror provision in relation to any other part of the Appellant’s supplies. We also agree with the Appellant’s submissions above that, in the order they were made by the Appellant, Clause 26 (sending to print within a certain time), Clauses 71 – 73 (the books will meet a certain standard), Clause 28 (the importance of proof-reading) and Clause 31 (replacement of ghost-writer) demonstrate that the Contract’s purpose is to ensure that a book is produced. This conclusion is also supported by the clear production schedule/production plan which ensures the timely production of a book, see Clause 15 (this view disposes of HMRC’s point about the length of the production process). Further, there is no express provision in the Contract that permits the Appellant’s customers to receive only part of the Appellant’s supply which generates the text for the book. We accept that there is a variance in contractual price in respect of the ghost-writers’ time and/or experience (depending on which package is chosen) but the variance in price also encompasses the number of pages and photographs. Therefore, this variance is not sufficient to lead us to a different conclusion about the purpose of the Contract.

65. It is true Clause 18 references a process and that the Appellant’s books are the outcome of that process but we do not consider that that imbues Clause 18 with the meaning that the Appellant asserts. In our view Clauses 15 and 21 do not advance the Appellant’s case because such an approach essentially dissects the Appellant’s supply in the impermissible way discussed above. Quantitative importance of elements of a supply

66. The test in Město and the Court of Appeal’s comments on it in Gray & Farrar clearly reference the quantitative importance of elements of a supply. However, it does not appear totally straightforward to us how that is to be reconciled with the warnings about dissection of supplies discussed above. In any event, in terms of any quantitative analysis in this appeal we have rejected HMRC’s arguments that the majority of the Appellant’s direct costs are associated with the ghost-writers and so we do not need to consider it further. HMRC’s skeleton briefly observed that the printing costs were lower than the costs of the ghost-writers but that point was not developed further. Does anything vitiate our analysis of the Contract?

67. As set out above we were asked to consider a number of things that do not form (although some describe) part of the Contract including: the publicly available videos entitled ‘StoryTerrace Swift Webinar’ and ‘Talk: Capture your life story in a book’; the three quotes from and numerous references to ghost-writers on the Appellant’s website; the call script; the additional services (insofar as they included ghost-writing); and Mr Bruining’s uncontested evidence about various communications with its customers. We are satisfied that nothing in these vitiate our analysis of the Contract. Conclusion on application of the ‘predominance test’

68. We do not consider that this is a case where the bespoke nature/aspect of the Appellant’s supplies dominates such that we can conclude that the Appellant is making standard-rated supplies. That is because our view is the Contract’s purpose reflects the typical consumer’s and that is ensuring that a book is produced to be shared and enjoyed in its physical form: in other words that is the economic and commercial reality of the transaction, and its economic purpose.

69. In light of the above we consider that the typical consumer would regard the provision of the book as qualitatively the most important element of the Appellant’s supply. Therefore, in light of the Contract the provision of the book is the predominant element of the Appellant’s supply. CPP

70. HMRC made the alternative and mutually exclusive argument that the Appellant’s provision of books to its customers was ancillary to the provision of ghost-writing services pursuant to Card Protection Plan Ltd v Customs and Excise Commrs (Case C- 349/96). In light of our conclusions above we do not need to deal with that argument and so do not do so. Fiscal neutrality

71. An important part of the Appellant’s case was that HMRC’s treatment of it breached fiscal neutrality because, in broad terms, one of its competitors’ supplies were not being treated in the same way as the Appellant’s. It is unfortunate that, and it was not clear to us why, it was not until Ms Seymour’s examination in chief that HMRC revealed for the first time that it was treating the Appellant’s competitor’s supplies in the same way as the Appellant’s. Consequently, the Appellant withdrew its fiscal neutrality ground and we do not deal with it. conclusion

72. For the reasons set out above we uphold the appeal. right to apply for permission to appeal

73. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. Release date: 11 th DECEMBER 2025