VATHLT2087 - Doctors: Supply by Employment Business of Consultant Doctors to Employment Agency-Judgement of Court of Appeal (CoA)

This was an appeal by Mainpay Ltd against a decision of the Upper Tribunal (UT) dismissing its appeal from the First Tier Tribunal

The UT decided that Mainpay was liable to VAT at the standard rate when it provided doctors to an agency which in turn supplied them to NHS Trusts where the doctors worked. The issue in the appeal was whether those supplies by Mainpay to the agency were exempt from VAT as services of medical care falling within the exemption in Group 7 of Schedule 9 to the VAT Act 1994. Both the FTT and the UT focussed on the question of whether there was a supply of staff or a supply of services and concluded that the supplies were of staff which was standard -rated. The appellant objected but The CoA saw nothing wrong in that approach which was supported by UK case law and by the decision in Horizon College (Case C-434/05) where the CJEU drew a distinction between the supply of a teacher and the supply of education.

The tribunals were also right to consider the framework of control over the consultants (or the extent to which the NHS Trust exercised operational control) as the consultants had a very high degree of autonomy in their clinical decision-making. The framework included place and hours of work and the requirement for the consultants to observe local policies laid down by the NHS Trust. The Appellant based its case on the two part test in Kügler (Case C-141/00)v and in Particular paragraph 27 which says:

27 On a literal interpretation, that provision does not require medical services to be supplied by a taxable person endowed with a particular legal form in order for them to be exempt. Just two conditions need to be met: medical services must be involved and they must be supplied by persons who possess the necessary professional qualifications.

However, the CoA concluded that the medical services were the diagnosing, treating and, in so far as possible, curing diseases or health disorders and were not a mere involvement in medical services using the expansive meaning favoured by the Appellant. The court referred to the other language versions of the judgment to confirm its interpretation of the paragraph was accurate.

The Appellant’s argument that it had control over the consultants was rejected by virtue of the employer-employee relationship was also rejected. The FTT had concluded, based on the contractual arrangements and the circumstances in which the consultants worked, that the consultants were under the control, direction and supervision of the NHS Trusts for the duration of the assignment; they effectively became part and parcel of the NHS Trusts which themselves provided medical care to patients. In consequence, it found that the essence of the supply was that of staff, rather than medical services .

The Appellant’s argument that there was a breach of fiscal neutrality was also rejected.