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student at work | accountingweb | VAT treatment of supply of academic work

Student essay supplier learns lesson in VAT case


A business connecting students with academic writers failed to achieve the results it wanted in this VAT case.

2nd Oct 2023
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Agent vs principal can be a controversial area in VAT and case law contains numerous examples of when misunderstanding it can result in a big VAT bill for the taxpayer. The fundamental principle of VAT is that we always need to return to the question: who is providing what to whom?

All Answers operates a website through which students can order academic work such as essays, dissertations and pieces of coursework, which are then written by third parties. The price is based on the nature of the work, the grade required and the length of the essay.

The writers are not employed by All Answers, and most are trading below the VAT registration threshold and so are not VAT registered.

Those who follow VAT case law may already be familiar with the set-up of All Answers Limited, as this is the third time it has reached our tribunal system. As explained in the upper tribunal case, All Answers generally retains around two thirds of the fee, and pays one third to the writer. The example given in the tribunal was a fee of £240, with £160 retained by All Answers and £80 passed to the writer.

Agent or principal?

All Answers argued that it was acting as agent of the writer in relation to the supply of the academic work. The supply of the work is from the writer to the student, and All Answers merely facilitates it. As such, it argued that VAT should only be due on the £160 paid for the agency services.

HMRC argued that All Answers is acting as principal on the grounds that the contractual agreement for the supply of the essay is between All Answers and the student and the £80 paid to the writer is consideration for a separate supply made by the writer to All Answers. As such, HMRC argued that VAT is due on the total amount paid by the student of £240.

The upper tribunal, in 2020, considered the contractual terms and whether these reflected the commercial and economic reality.

The key points noted by the UT were as follows.

  • The writer gave All Answers authority to enter into a contract as their agent.
  • However, the “core” obligations to deliver work of a specific standard, and by a specific deadline, were binding on All Answers, not on the writer.
  • There was a “no plagiarism guarantee”, which did bind the writer.
  • The entire copyright of the academic work transferred from the writer to All Answers.
  • All Answers granted the student limited rights to use the work.

Based on the above, the UT held that All Answers was acting as principal and so VAT was due on the full amount received from the student.

What changed?

Subsequently, All Answers provided HMRC with revised contracts, which it claimed better reflected the economic reality of the suggested agency relationship.

Standard contracts were provided by All Answers to the student, and by All Answers to the writers. There was no written contract between the writer and the student.

All Answers submitted that the key changes to the contracts were the following.

  • Copyright was to remain with the writer, rather than transferring to All Answers.
  • There was a term in the contract with the writers that stated: “You agree that when you do bid for a project and we allocate it to you, this is a binding contract for services between yourself and the customer.”

A matter of principal

The first tier tribunal (FTT) considered the above two points in detail. It found that updating those clauses did not achieve the objective of transferring the “core” obligations from All Answers to the writer.

In its summary, the FTT stated: “The circumstances of the transactions and overall business operations are the same before and after the updates to the contracts. The reality is that All Answers pays consideration to the writer for the supply of the service of preparing the academic work. All Answers assumes liability for the obligation to provide the customer a limited right to use academic work, of suitable quality, within the stipulated timescale, and are paid in return. We consider the terms of the updated contracts impose those “core” obligations on All Answers, and not on the writer, and are therefore consistent with commercial and economic reality that All Answers delivered the academic work.”

The key takeaway is that no legal relationship had been created between the writer and the student.

All Answers was still acting as principal, and VAT was due on the full amount paid by the student.

Replies (13)

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By CathyM1
02nd Oct 2023 20:02

So it's ok for HMRC to tax a completely immoral activity? Was this aspect mentioned in the case?

Thanks (6)
Replying to CathyM1:
By SteveHa
03rd Oct 2023 10:34

It always has been. Back in the late 80s/early 90s in my HMRC days we had a house full of "models" that were properly taxed.

Thanks (6)
Replying to SteveHa:
By CathyM1
04th Oct 2023 01:31

I obviously led a very sheltered life in industry and education!


Thanks (0)
Replying to CathyM1:
By gillybean04
03rd Oct 2023 11:15

I could spend most of the day naming activities that are of dubious morality and that are widely accepted (and taxed). How many moral lines does commerce cross in the name of profit on a daily basis?

How many billions in tax revenue would we lose if HMRC could only tax the moral ones? Who decides what crosses the line and what merely dances around the line?

I'd expect a trade being immoral to be argument for higher taxation, if anything. You could even say it would be immoral to base taxation on morality. Having morals is expensive enough without it being taxable.

But I'd say the immorality isn't in paying someone to write something for you. It's in passing off someone else's work as your own irrespective of whether you paid them to do it, found it on a bus or copied it from a friend.

Thanks (3)
Replying to CathyM1:
paddle steamer
03rd Oct 2023 14:20

Suitable punishment-"something lingering, with boiling oil in it, I fancy. Something of that sort. I think boiling oil occurs in it, but I'm not sure."

Thanks (1)
By SuperAccountingSteve
04th Oct 2023 10:27

if its not already illegal to supply essays, dissertations and coursework, it should be, peoples lives can depend on people who may have been hired after gaining qualifications through this manner.

Thanks (3)
By smill
04th Oct 2023 10:36

It's not for HMRC to cast judgement on the morality of a (still) legal activity, but I would be worried if they let them do it without applying the tax rules everyone else has to comply with.

As someone who operates a business introducing clients to underlying self-employed people, I go to great trouble to ensure that the contact is between the client and the worker, and not us, so this tribunal decision does not surprise me in the slightest.

I can only assume that All Answers knew they were probably going to have to pay anyway, but decided it was worth a punt, and they would get more free publicity by taking it to the tribunal.

Thanks (0)
By unclejoe
04th Oct 2023 10:40

Aside from the morality of this, is a student passing off an essay written by someone else as his/her own not fraud? If it isn't it should be, and should be prosecuted. And the company and ghost writers would be guilty of facilitating crime. How would fellow accountants feel about people buying their way into the profession like this.

Thanks (0)
04th Oct 2023 10:57

If it moves, tax it. I am sure HMRC would love to tax the billions in the drugs industry as well. In fact in many cases I am sure they actually do.

Stupid All Answers: an immoral person will always want to avoid actual taxes due with nonsense, not suprised they keep trying. Laughable how they thought going back to their "contract" and amending it, would change the result when clearly the substance of the transaction hadn't changed.

Thanks (0)
By unclejoe
04th Oct 2023 11:24

A follow on from my earlier comment. I suspect that HMRC may have difficulty recovering that VAT. According to the Companies House the company has filed for voluntary liquidation, with just £44 showing as net assets on its last filed accounts. As a small company no P&L was lodged so we don't know how much money was being made from this enterprise, but perhaps Note 14 gives us a clue where it states: "During the year the company paid £840,000 (2019 £910,000) for consulting and management services to Business Bliss Consultants FZE, a company that is wholly owned by the director of the company Mr B Littlewood."

It seems likely that there is a lot more than just this VAT that really should be going to HMRC. The "FZE" after the consulting company name stands for "Free Zone Establishment" which is a type of company set up in the United Arab Emirates. According to the UAE Free Zone website ( registration as a UAE free zone company has many benefits including: 100% exemption from corporate & income taxes, 100% exemption from customs duties, 100% repatriation of capital & profits, and 100% foreign ownership!

Isn't capitalism in the 21st century wonderful!

Thanks (0)
By Springfield
04th Oct 2023 11:27

Surprised this company didn't top and tail these essays with some detailed explanatory or guidance notes and then pass the whole enterprise off as provision of "Educational supplies" and therefore exempt from VAT altogether?

Might have worked at least until Starmer begins the complex exercise of removing the education exemption explicitly from private schools, whilst retaining it for the public sector.

Thanks (0)
By nekillim1000
04th Oct 2023 13:57

With ChatGPT AI students can obtain all they need for free now!!!

Thanks (0)
By cpavett
04th Oct 2023 16:10

Regardless of the morality of this case, it seems that All Answers had a basic misunderstanding of the VAT rules. If All Answers had simply offered an introduction service, then it would not have had to charge VAT on any invoices raised by the essay writers to the students. However, it seems clear that Any Answers were providing a complete package service and therefore the VAT is chargeable on the whole service. The whole service being to enable cheating from what I can see.....

The error is so basic that it surprises me that they though they could win this one. Perhaps All Answers should have posted a question in Any Answers!

Thanks (0)