UT/2023/000009 - [2024] UKUT 00162 (TCC)

The appellant, Spectrum Community Healthcare CIC (“Spectrum”) provides, or sub-contracts provision of, various healthcare services in prisons in England pursuant to a contract with NHS England (“NHSE”). This appeal concerns the VAT treatment of those.

It is agreed that the medical care provided to prisoners is exempt for VAT purposes. Spectrum argues however, on the basis of case-law applying the relevant medical exemptions in Article 132(1)(b) and (c) of the Principal VAT Directive (“PVD”), that its supplies of prescription drugs and non-prescribed contraceptives are separate non-exempt supplies. The turnover generated by those separate taxable supplies (which are respectively zero-rated and reduced rated) would require Spectrum to be VAT registered (with the consequence Spectrum could recover the input tax attributable to those taxable supplies; input tax that would otherwise be irrecoverable if the supplies were comprised within a single exempt supply of healthcare).

In agreement with HMRC, the FTT decided that Spectrum made a single exempt composite supply of “primary healthcare or health and social care”, components of which included the provision of drugs and contraceptives, which fell within the exemption in Article 132(1)(c) of the PVD.

With the permission of the FTT, Spectrum appeals to the Upper Tribunal on a number of grounds. To understand those and the relevant parts of the FTT Decision it is convenient to start with the legal framework to VAT and the relevant European and domestic jurisprudence.