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HMRC internal manual

VAT Health

Wholly performed or directly supervised: Tribunal decisions

There are a number of Tribunal decisions on the subject of “direct supervision”. Details of some key decisions follow.

Easyway Productions Ltd (VTD 14938) was heard in December 1996 and May 1997. In 1983 Mr Allen Carr (a director of Easyway) developed a system of individual (and then group) therapy to help people stop smoking. In 1985 he published a book and in 1989 he took on an associate, Mr Hayley. Neither Mr Carr nor Mr Hayley had any medical qualification. By the time of the Tribunal hearing Mr Carr’s son had trained as a doctor. Dr Carr had been at school in 1983 and in his “pre-med” year at university in 1985. He provided services which the Tribunal described as “of an informal, advisory nature” over the following several years. Mr Carr argued that Dr Carr directly supervised him and Mr Hayley.

The Tribunal found that Dr Carr did not decide the patient’s level of care, and he “last visited a building where a therapy session was being conducted in 1992 and … did not partake in it”. The Tribunal concluded that Dr Carr’s active involvement in developing the method and “vetting” the book was irrelevant as he was not a registered doctor at the time, and when he was registered his “informal advice” did not constitute supervision.

However, Easyway appealed again in 2007 (UKFTT 181 (TC), claiming that since the time of the first decision they now employed the services of a doctor who directly supervised the therapists. The tribunal accepted Easyway’s arguments that the doctor had regular involvement with the therapists, monitoring their sessions, and ensuring that they could always contact him. He also had medical input in assuring that any medical issues arising from therapy were appropriately addressed.

Carragh Pittam (VTD13268) concerned a chiropractor. Certain doctors and surgeons referred patients to her. She argued that her services to those patients were exempt, by virtue of being directly supervised by the referring practitioners. However, the Tribunal pointed out that neither Dr Pittam nor the referring practitioner had said “in terms that he supervised her, let alone supervised her directly” and moreover, that the referring practitioner “said that it would be professionally improper to carry out spot checks”, The Tribunal therefore found that direct supervision did not exist. (This appeal pre-dated the introduction of VAT exemption for Chiropractors’ services on 15 June 1999).

In the case of A & S Services (VTD 16025) Mr Jones manufactured and dispensed spectacles. He claimed he was directly supervised by Mr Hamdi, an ophthalmic medical practitioner who sent his patients to Mr Jones if they wanted him to recommend a dispenser. Mr Hamdi did not attend Mr Jones’ premises, and there was minimal telephone contact between them. The only regular check carried out by Mr Hamdi was that when, in time, a customer came for their next eye test he would check whether the spectacles had been dispensed in accordance with his prescription. This check was made 1-2 years after the dispensing took place, and obviously could not be carried out for customers whose previous prescription was issued by someone else or who did not return to Mr Hamdi. Though sympathetic to Mr Jones’ claim that he was highly proficient and required little supervision, the tribunal found that he had to be “directly supervised” for the purposes of VAT exemption and his arrangement with Mr Hamdi did not amount to supervision.