TC09678 - [2025] UKFTT 01320 (TC)

Our conclusion at paragraph 29 above disposes of the appeal and it is therefore strictly unnecessary for us to consider whether the Appellant’s supplies were closely related to the supplies of medical care which HMRC accept, as they must, are supplied by the Appellant’s clients.

However, the point was raised by the Appellant in the amended GoA in which it contended that for the Appellant’s clients the engagement of agency nurses was an “indispensable stage in the supply of medical care” influencing the cost of healthcare and, as suchthe supply of such staff qualified as closely related to medical care for the purposes of the exemption. Having ceased to be represented, the Appellant was ill equipped to develop the argument; it was not addressed in the skeleton argument at all and neither Mr Odong nor Mr Ajayi provided any analysis to support the amended GoA.

However, HMRC fully argued the point before us, and we consider it appropriate to shortly indicate what our decision on this issue would have been had we needed to determine it.

HMRC provided a comprehensive review of the European and domestic case law on “closely related” supplies. From which they asserted that a supply of staff did not represent an “indispensable stage in the process of the supply of medical care” by the Appellant’s clients and as such was not closely related.

We were referred to the following CJEU cases which have determined whether certain supplies are closely related supplies in the context of Article 132(1)(b):

We accept that the critical themes to be taken from these cases requires us to look at the relationship between the services provided by the Appellant, namely a supply of staff, and the provision of medical care to determine whether the supply of the agency workers to the Appellant’s clients represents an indispensable stage in the provision of medical care by the client hospitals and establishments.

Before applying the facts as we have found them, we have regard to the CJEU judgment in Stichting Regionaal Opleidingen Centrum Nooord-Kennemerland/West Friesland (Horizon College) v Staatssecretaris van Financien (C-434/05 [2008] STC 2145) (Horizon) which is the only case to have considered a supply of staff as a potentially exempt supply closely connected with an underlying exempt supply. The context of the case was the education exemption prescribed in Article 132(1)(i) which provides for the exemption of supplies of education and goods and services closely related to education by bodies governed by public law with educational aims and other bodies recognised by member states with similar aims.

Horizon made some of its teachers available to other educational establishments, the receiving or host establishments assumed responsibility, direction and control for the teachers it received pursuant to the contract between Horizon, the host and the teacher. The charges made by Horizon were limited to the employment costs incurred by them in respect of the teacher. The first issue before the CJEU was whether there was a supply of education by the assigned teacher, the answer was no, there was a supply of staff. The second question was whether the supply of staff was a supply closely connected to education. A third question asked whether it made a difference whether Horizon was, itself, an educational institution.

In giving its judgment on the closely related question, the Court considered the provisions of what is now Article 132(1)(i) and 134 compendiously. The Court confirmed that a supply was “closely related” to another supply applying the same test as that for determining the existence of a composite supply i.e. whether the related supply is ancillary to the principal supply, providing a means of better enjoying that principal supply. The Court accepted, in principle, that a supply of staff on a temporary basis to carry out the teaching duties in the host establishment could be a supply closely related to the supply of education made by the host establishment because such supplies enabled students to better enjoy the education provided by the host establishment (paragraph 30). This was so even though Horizon was not itself suppling education to the students (paragraph 31).

The “in principal” conclusion was then stated to be subject to the following conditions derived from both Article 132(1)(i) and 134:

We turn therefore to consider whether, had the Appellant been a state regulated institution meeting the terms of Note 8, we would have considered the supplies to be closely related.

In this regard we observe that the Advocate General in Horizon noted the argument in favour of treatment of the supplies of staff as being closely related as “if students are receiving education, … from an educational establishment, and that establishment suffers a temporary shortage of qualified teachers or instructors, then the benefit of the education or training received will be greatly enhanced by the school secondment qualified staff from another such establishment” (paragraph 71). The Advocate General then comments “[t]hat view appears so immediately and obviously correct, as a matter of common sense, that a very powerful reason indeed would seem necessary in order to refute it” (paragraph 72).

We agree that, particularly in the context of the finding we have made by way of judicial notice as set out at paragraph 27(13) without agency nursing staff the NHS at least would not be able offer safe medical care. The agency nurses provided as a supply of staff by the Appellant provide what we consider to be an essential resource that enable the Appellant’s clients to provide a standard of medical care which would not be provided were the hospitals to have to rely only on permanent employed and bank nursing staff (bank nurses are contracted directly to the hospital or Trust and provide additional flexible resource). Therefore, and as articulated in Horizon, the medical care received by the patients of the Appellant’s clients would not be of equivalent value without the provision of agency staff by the Appellant and other providers to the hospitals and similar state regulated establishments. Thus, the nature of the activity carried on by the Appellant is “in principle” closely related to medical care.

We are satisfied that the Appellant ensures that the nurses it provides meet the requirements set by its clients in terms of vetting, fit to work assessments and training etc. and such compliance is audited to the satisfaction of the clients. The Appellant does not do more than is required and certainly has not satisfied us that it sets itself apart from other similar providers.

We consider, on the facts, that it provides a service akin to that provided by other commercial providers and potentially to that provided by state regulated institutions. The nature of the market for such services (to the extent that it involves both commercial and state regulated providers) drives the conclusion that all suppliers will make taxable supplies because the exemption of such services by state regulated institutions would distort the commercial market and breach Article 134. The position may well have been otherwise pre 2010 when all nursing agencies were registered with the CQC but that is not the case before us.