All Answers operates a number of websites, including UK Essays.com, where students can buy essays, dissertations or pieces of coursework to be written for them. Once the student has ordered an essay, the assignment is advertised on a separate portal on which writers, usually a lecturer, teacher or PhD student, can bid to take on the work. The essays are offered as model answers to help inspire the student when writing their own work. However, it is feasible that students might try to pass-off the text as their own.
HMRC took the view that All Answers sold the essay-writing service as principal and was therefore liable to account for output tax on the full fee charged to students. It assessed the company for almost £1m VAT covering a three-year period. Conversely, All Answers argued it acted as an agent, matching customers with essay-writers, and that this was supported by its contracts, so it was only liable to output tax on its retained share of the fee.
In 2018 the First Tier Tribunal (FTT) took a dim view of the company, for allegedly conspiring with potentially dishonest students and collaborating with academics ‘to debase academic achievement’ but conceded that the company did not act illegally, and its contracts were not a complete sham. However, having examined the terms and conditions, which were written with the aim of creating an agency relationship, the FTT decided to put the contracts aside and instead regarded the service as provided by the company as principal. This meant VAT was due on the full payment received from the student.
All Answers appealed the decision to the Upper Tribunal (UT) on the basis that the FTT had erred in law when it discounted the contracts, and those contracts made it clear they were acting in an agency capacity. The UT ultimately reached the same conclusion as the FTT, albeit via a different route.
The UT considered that the contracts should not be overlooked, but ultimately concluded there was a legal relationship between All Answers and its customers under which All Answers assumed complete liability for the obligation to provide a limited right to use the academic work of suitable quality within the stipulated timescale. Despite the contracts referencing an agency relationship, All Answers was still acting as a principal when providing its service.
All Answers also voiced its disagreement with the FTT comments on what it saw as the unethical nature of the company’s business, but that matter was not found to be relevant to the VAT position of the supply, so was not explored further at the UT hearing.
The notion of ‘contract is king’ can normally be relied upon and the FTT decision was a rare example of a tribunal finding it was at odds with the economic and commercial reality of the transactions it covered. However, this aspect has now been overturned by the UT, which found there was simply a dispute over how to interpret the contract.