Two recent decisions address the VAT liability of certain services to the NHS. Spectrum Community Health CIC v HMRC [2022] UKFTT 237 (TC) (Spectrum) deals with a bundle of medical services for patients in prisons. E-zec Medical Transport Services Ltd v HMRC [2022] [2022] UKFTT 302 (TC) (E-zec) deals with the supply of non-emergency passenger transport.
Neither case involved any great point of principle; both turned very much on their facts. While every taxpayer should be treated equally, it still seems odd for the government’s left hand (HMRC) to spend time and money trying to increase costs for the government’s right hand (the NHS). Surely, having encouraged the rest of us to bring our hands together for the NHS, the government could do the same?
While the opportunity to grumble about government intransigence is not to be sniffed at, these two cases flag interesting points about how legislation works. One as a point of semantic detail, and the other in a more broad brush, but no less important way.
E-zec deals with the point of detail. The case is about zero-rating for passenger services. In particular, the interaction between item 4A and note 4D of VATA 1994 Sch 8 Group 8 para 1.
If you have ever spent an evening pondering the interaction between notes and the items in Schedules 7-9 of VATA 1994, then E-zec is fascinating. If you have not, then clearly you should question your life choices.
Paragraph 52 is the interesting bit. It refers to the Upper Tribunal decision in Jigsaw Medical Services Ltd v HMRC [2018] UKUT 222 (TCC) and the relationship between primary provisions and the notes to those provisions. The notes form part of the legislation, but in what capacity? The format appears throughout Schedules 7A, 8 and 9 and can only be described as a form of legislative sadism. Jigsaw is a judicial analgesic, as it seeks to explain the relationship between the primary statutory provision and the notes that clarify it.
The notes do not determine zero-rating. The scope of any zero-rate is set by the primary provision. The notes are interpretive provisions requiring the primary provision to be read in a particular way. E-zec’s passenger transport services were zero-rated because they fell within item 4a, as read in the light of note 4D.
While this may seem like semantics, much tax legislation is a constructed linguistic jigsaw. Understanding the relationship between primary provisions and conditioning provisions can be vital to understanding the meaning as a whole.
The more broad-brush point is about the policy purpose behind tax legislation.
The tribunal in E-zec considered the policy purpose behind note 4D and recognised that the beneficiary of the supply and the policy underlying Note 4D was the wheelchair user. When interpreting note 4D, the tribunal took into account the underlying policy behind note 4D, but also the beneficiary rather than the strict recipient of the supply.
In Spectrum, the tribunal accepted that prisoners were the beneficiaries of the supply but not the recipients. It therefore had to have regard to the objective view of the recipient when determining whether a single supply existed. However, Spectrum also dealt with a combination of exempt, reduced and zero-rated activities, where the purpose of the non-standard VAT treatment was to reduce the costs of healthcare. That brings to mind Talacre Beach Caravan Sales Ltd v HMRC (Case C-251/05) and European Commission v France (Case C-94/09).
Few have successfully relied on Talacre and Commission v France, but could HMRC have found it in its heart to compromise in this instance?
Home >Articles > Indirect effects: VAT and the NHS
Indirect effects: VAT and the NHS
What do two recent case decisions tell us?
Two recent decisions address the VAT liability of certain services to the NHS. Spectrum Community Health CIC v HMRC [2022] UKFTT 237 (TC) (Spectrum) deals with a bundle of medical services for patients in prisons. E-zec Medical Transport Services Ltd v HMRC [2022] [2022] UKFTT 302 (TC) (E-zec) deals with the supply of non-emergency passenger transport.
Neither case involved any great point of principle; both turned very much on their facts. While every taxpayer should be treated equally, it still seems odd for the government’s left hand (HMRC) to spend time and money trying to increase costs for the government’s right hand (the NHS). Surely, having encouraged the rest of us to bring our hands together for the NHS, the government could do the same?
While the opportunity to grumble about government intransigence is not to be sniffed at, these two cases flag interesting points about how legislation works. One as a point of semantic detail, and the other in a more broad brush, but no less important way.
E-zec deals with the point of detail. The case is about zero-rating for passenger services. In particular, the interaction between item 4A and note 4D of VATA 1994 Sch 8 Group 8 para 1.
If you have ever spent an evening pondering the interaction between notes and the items in Schedules 7-9 of VATA 1994, then E-zec is fascinating. If you have not, then clearly you should question your life choices.
Paragraph 52 is the interesting bit. It refers to the Upper Tribunal decision in Jigsaw Medical Services Ltd v HMRC [2018] UKUT 222 (TCC) and the relationship between primary provisions and the notes to those provisions. The notes form part of the legislation, but in what capacity? The format appears throughout Schedules 7A, 8 and 9 and can only be described as a form of legislative sadism. Jigsaw is a judicial analgesic, as it seeks to explain the relationship between the primary statutory provision and the notes that clarify it.
The notes do not determine zero-rating. The scope of any zero-rate is set by the primary provision. The notes are interpretive provisions requiring the primary provision to be read in a particular way. E-zec’s passenger transport services were zero-rated because they fell within item 4a, as read in the light of note 4D.
While this may seem like semantics, much tax legislation is a constructed linguistic jigsaw. Understanding the relationship between primary provisions and conditioning provisions can be vital to understanding the meaning as a whole.
The more broad-brush point is about the policy purpose behind tax legislation.
The tribunal in E-zec considered the policy purpose behind note 4D and recognised that the beneficiary of the supply and the policy underlying Note 4D was the wheelchair user. When interpreting note 4D, the tribunal took into account the underlying policy behind note 4D, but also the beneficiary rather than the strict recipient of the supply.
In Spectrum, the tribunal accepted that prisoners were the beneficiaries of the supply but not the recipients. It therefore had to have regard to the objective view of the recipient when determining whether a single supply existed. However, Spectrum also dealt with a combination of exempt, reduced and zero-rated activities, where the purpose of the non-standard VAT treatment was to reduce the costs of healthcare. That brings to mind Talacre Beach Caravan Sales Ltd v HMRC (Case C-251/05) and European Commission v France (Case C-94/09).
Few have successfully relied on Talacre and Commission v France, but could HMRC have found it in its heart to compromise in this instance?
