UT/2023/000021 - [2024] UKUT 00334 (TCC)

This issue only arises if the Trust is successful on Issue 3, which it is not. We shall however briefly outline the issue and HMRC’s stance on it in case we are wrong in that view. Under paragraph 2 of Article 13, even where the public body is engaging in activities “as” such, they will be regarded as a taxable person in respect of those activities “where their treatment as non-taxable persons would lead to significant distortions of competition”. HMRC’s position is that, based on Rank Group plc v HMRC (Joined Cases C-259/10 and C-260/10), HMRC can satisfy the requirement that the treatment would lead to that outcome as soon as actual competition has been found on the facts. In this case, if the issue arose for determination, HMRC would accordingly then say that they have shown that the activities would lead to significant actual or potential distortion on the basis of Mr Sands’ evidence regarding the awareness of private economic operators being commissioners to deliver health visitor services (Virgin Care and non-for profit organisations are mentioned at [27] and [28] of his statement) and in relation to sexual health services (Virgin and Community Interest Companies such as Spectrum operating in Essex and Southend) at [42]). We have recorded that evidence above and that we have accepted it ([13] and [76]). HMRC’s submission based on Rank was, however, specifically rejected by the Court of Appeal in Northumbria when it considered the application of the second paragraph of Article 13 to the issue there ([140]- [158]). HMRC accept that the Upper Tribunal is bound by the Court of Appeal’s reasoning and that HMRC could not therefore succeed on this issue before us if it arose for determination. They reserve their position on this, however, in the view of their pending appeal against Northumbria CA to the Supreme Court.

Accordingly if we were wrong in our analysis above that there was not a special legal regime (Issue 3), HMRC’s case that the Trust was a taxable person on the basis of the second paragraph of Article 13 (the burden being on them to show no significant distortion) would not succeed and the Trust’s claim that HMRC were wrong not to have concluded the Trust’s supplies were “non-business” would be correct.