UT/2023/000122 - [2025] UKUT 00341 (TCC)

Ground 4 is that the FTT failed to address or record its response to the Appellant’s submission that HMRC were effectively seeking to override a decision of Parliament when implementing Article 132 of the PVD. It is submitted that Parliament decided not to exclude specifically from exemption cosmetic care which also has a therapeutic purpose.

Article 131 provides that the exemptions are to apply without prejudice to other Community provisions, which include: the principles of fiscal neutrality, legal certainty, effectiveness and proportionality. It also provides that exemptions are to apply in accordance with conditions which Member States shall lay down for the purposes of ensuring the correct and straightforward application of those exemptions and of preventing any possible evasion, avoidance or abuse.

The Appellant says that Parliament has not enacted any conditions pursuant to Article 131 and it is not permissible for HMRC to fill what they may perceive to be a gap in the legislation by administrative fiat, which is what they have effectively sought to do in this case. Nor could the FTT do so. Such an approach is contrary to the principles of legal certainty, proportionality, and Article 131. The FTT’s insistence on a highly formulaic diagnosis and/or a formal psychology qualification exceeds the boundaries of Item 1 and is therefore impermissible.

We do not consider that this ground of appeal establishes any error of law on the part of the FTT. The FTT simply decided that it was not satisfied that the services supplied consisted of medical care, or at least were not made for the principal purpose of providing medical care. It was not purporting to impose conditions pursuant to Article 131 where Parliament itself had not imposed conditions. The FTT correctly applied the words of Chadwick LJ in Expert Witness Institute at [17]:

“17.

… The court must recognise that it is for a supplier, whose supplies would otherwise be taxable, to establish that it comes within the exemption, so that if the court is left in doubt whether a fair interpretation of the words of the exemption covers the supplies in question, the claim to the exemption must be rejected.”

It is said that the FTT was bound to ensure the correct and straightforward application of the exemption. It failed to do so because the concept of principal purpose does not lead to a straightforward application of the exemption. There are no analytical tools to identify the principal purpose. We have already dealt with this submission under Grounds 1 and 2 and set out what we consider should be the approach to identifying the principal purpose of a supply in the context of cosmetic services.