Glint Pay Services offered retail customers the opportunity to purchase, save and spend gold through a bespoke mobile application that operated under the Mastercard system allocating e-money accounts and a separate gold account to customers.

The gold was held in Switzerland by a member of the London Bullion Market Association (LBMA), based in Zurich, in the custody of StoneX, who was the sole liquidity provider to Glint.

In the course of Glint’s application for approval of a partial exemption, HMRC submitted that its sales to clients were exempt supplies of investment gold under Group 15 of Schedule 9 to the Value Added Tax Act 1994 (VATA).

Note 4 of Group 15 states that ‘this group does not include a supply (a) between members of the LBMA, or (b) by a member of that association to a taxable person who is not a member or by such a person to a member.’

Consequently, this meant that Glint could not deduct input tax attributable to those supplies, which it later attempted to appeal at the First Tier Tribunal (FTT) but withdrew before the case was heard.

Glint then challenged HMRC’s decision at a judicial review, claiming it had a legitimate expectation that its supplies would be zero-rated under the VAT Terminal Markets Order 1973 (TMO). It also claimed that in light of it, HMRC’s March 2019 decision was ‘irrational’.

This was based on statements in a 2013 Memorandum of Understanding between HMRC, the LBMA and the London Platinum and Palladium Market (MOU).

At the High Court, Clint argued that the MOU contained ‘clear and unequivocal representations’ that transactions of the same type as its supplies of gold would be zero-rated. Thus, an ‘ordinarily sophisticated taxpayer’ would expect the MOU to apply and the supplies to be zero-rated.

It pointed to paragraph 3.4 of the MOU, that the zero-rate is available in transactions between non-members provided that a member of the LBMA retains physical control over a metal – essentially being stored within a member’s vault.

Glint’s supplies met this condition since they were between clients of the LBMA, which were non-members, and the gold was physically stored in a vault under the custody of StoneX.

Glint contended that the MOU was published with the ‘imprimatur of HMRC’ and that HMRC had continued to endorse it, as evidenced in a January 2021 webinar and an email exchange in June 2021, between LBMA and HMRC.

However, the High Court found that the terms of the MOU did not cover a system enabling retail customers to buy gold while it remained protected in Brink’s vault in Switzerland. It dealt with the dealing of LBMA and LPPM members trading on the wholesale bullion and precious metals markets. It did not contemplate the retail transactions Glint was engaged in.

Sir Ross Cranston said: ‘In my view, Glint’s case falls at the first hurdle. On its face, the MOU does not state in terms which are clear, unambiguous, and devoid of any relevant qualification that Glint’s supplies of gold would benefit from any additional carve out in addition to what is provided by law. In short, the MOU is not addressed to those like Glint or its customers; it does not contemplate the retail transactions engaged in.

‘As to the specific provisions of the MOU, Glint does not unambiguously fall within their terms, quite the opposite. The reality is that there is no provision in any of Glint’s contracts for an LBMA member, be it StoneX or Brink’s, to be a party to its transactions with its customers, and certainly not as a clearing member for the transfer of an interest in the gold between it and its customers, whether by assignment or otherwise.’

For the reasons given Glint’s claim was dismissed with costs.

Angela Bedi, senior tax writer at Croner-i, said: ‘This is the second decision in less than a week where the lack of an approach to HMRC has been detrimental to the claim of a legitimate expectation, the judge, in this case, describing it as a compelling reason why a decision by HMRC would not be an unjust exercise of power to frustrate any expectation a taxpayer may have had.’