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

The conditions for exemption for supplies of medical care are deceptively straightforward. For present purposes, supplies are exempt where they consist of the provision of medical care by a registered medical practitioner. It is common ground that Dr Shotter is a registered medical practitioner. The issue which the FTT grappled with is whether some or all of the Appellant’s supplies consisted of the provision of medical care.

What amounts to medical care for these purposes has been considered in a number of decisions of the Court of Justice of the European Union (“the CJEU”). The scope of the exemption has also been considered by the Upper Tribunal and subsequently the Court of Appeal in Mainpay Limited v HM Revenue & Customs [2022] EWCA Civ 1620.The parties’ submissions involved a detailed analysis of these decisions. Before we come on to consider those submissions, it is worth setting out how the interpretation of the exemption for medical care has developed in the CJEU and the issues raised in Mainpay.

It is well established that exemptions are to be strictly interpreted since they constitute exceptions to the general principle that VAT is to be levied on all goods and services supplied for a consideration by a taxable person. However, they are not to be interpreted restrictively in the sense that the court or tribunal is not required to give the exemption its most restrictive interpretation. An exemption must be construed consistently with its objective.

The first case chronologically is D v W Case C-384/98 where the CJEU considered medical services provided by a doctor in his capacity as a court expert carrying out genetic tests in the context of a paternity dispute report. The question was whether the doctor was providing medical care. The CJEU stated at [18]:

It is notable that the CJEU interpreted medical care by reference to the purpose of a medical intervention. It did not need to address the question of whether there might be more than one purpose.

In Ambulanter Pflegedienst Kügler Gmbh v Finanzamt für Körperschaften in Berlin Case C-141/00 (“Kügler”) the CJEU considered whether the exemption for medical care depended on the legal form of the entity providing the care. It also considered whether the exemption applied to an out-patient service under which home care was provided by qualified nursing staff. The CJEU referred to [18] of D v W at [38] and continued:

As far as we are aware, this is the first reference to a “therapeutic aim” which appears to be a shorthand for the test described in D v W. The CJEU also appears to extend the meaning of medical care as previously defined to cover the prevention of disease and health disorders.

The scope of the exemption was subsequently considered by the CJEU in d’Ambrumenil and another v Customs and Excise Commissioners; and Unterpertinger v Pensionversicherungsanstalt der Arbeiter Case C-307/01; C-212/01 (“d’Ambrumenil”). It is clear from d’Ambrumenil and other cases that the purpose of the exemption is to reduce the cost of medical care and to make medical care more accessible.

The CJEU in d’Ambrumenil was concerned with the following supplies of services provided by doctors:

The CJEU held that these activities would not fall within the exemption for medical care unless the principal purpose was therapeutic:

“58.

While it follows from that case-law that the provision of medical care must have a therapeutic aim, it does not necessarily follow therefrom that the therapeutic purpose of a service must be confined within an especially narrow compass (see, to that effect, Commission v France, paragraph 23). Paragraph 40 of the judgment in Kügler shows that medical services effected for prophylactic purposes may benefit from the exemption under Article 13A(1)(c). Even in cases where it is clear that the persons who are the subject of examinations or other medical interventions of a prophylactic nature are not suffering from any disease or health disorder, the inclusion of those services within the meaning of provision of medical care is consistent with the objective of reducing the cost of health care, which is common to both the exemption under Article 13A(1)(b) and that under (c) of that paragraph (see Commission v France, paragraph 23, and Kügler, paragraph 29).

59.

On the other hand, medical services effected for a purpose other than that of protecting, including maintaining or restoring, human health may not, according to the Court's case-law, benefit from the exemption under Article 13A(1)(c) of the Sixth Directive. Having regard to their purpose, to make those services subject to VAT is not contrary to the objective of reducing the cost of health care and of making it more accessible to individuals.

60.

As the Advocate General correctly pointed out in paragraphs 66 to 68 of her Opinion, it is the purpose of a medical service which determines whether it should be exempt from VAT. Therefore, if the context in which a medical service is effected enables it to be established that its principal purpose is not the protection, including the maintenance or restoration, of health but rather the provision of advice required prior to the taking of a decision with legal consequences, the exemption under Article 13A(1)(c) does not apply to the service.”

This is the first reference to establishing the “principal purpose” of a medical service.

When the UK first introduced the medical exemption, all services supplied by certain registered medical practitioners within the scope of their registration were exempt from VAT. However, following d’Ambrumenil the UK amended Item 1 so as to require that a supply must consist in the provision of medical care.

It is also worthy of note that at [67] of d’Ambrumenil the CJEU extended the test of what amounts to medical care to include medical checks by employers or insurance companies, provided that the checks “are intended principally to enable the prevention or detection of illness or the monitoring of the health of workers or insured persons”.

The purpose test was applied in Future Health Technologies Limited v HM Revenue & Customs Case C-86/09 which concerned a private stem cell bank. Clients provided the taxpayer with samples of blood from the umbilical cord following birth. The blood was tested and where appropriate stored for possible future treatment of the child or other persons. HMRC took the view that the principal supply was storing the stem cells, which was not medical care. Analysis and processing the stem cells was ancillary to that activity. The CJEU held at [43] and [44]:

“43.

However, the activities in question in the main proceedings, as carried out by FHT, namely the despatch of a kit for collecting umbilical cord blood and the testing and processing of that blood and, where appropriate, the storage of stem cells contained in it, whether taken together or separately, do not appear to have as their direct purpose any actual diagnosis, treatment or cure of diseases or health disorders, or any actual protection, maintenance or restoration of health.

44.

In that regard, while the detection of illness may admittedly be one of the possible purposes of collecting stem cells from umbilical cord blood, it seems to be clear from the documents in the court file, and particularly from the contract, that the services provided by FHT are intended only to ensure that a particular resource will be available for medical treatment in the uncertain event that treatment becomes necessary but not, as such, to avert, avoid or prevent the occurrence of a health disorder, or to detect such a disorder in a latent or incipient state. If that were the case, which it is for the referring court to determine in the light of all the relevant facts in the proceedings before it, activities such as those in question in the main proceedings could not, by themselves, be regarded as being covered by the expressions ‘hospital and medical care’ in art 132(1)(b) of Directive 2006/112, on the one hand, or ‘medical care’ in art 132(1)(c) of Directive 2006/112, on the other.”

The CJEU in this case was therefore dealing with a supply which had more than one possible purpose. It was left to the referring court to determine what the purpose was in the light of all the relevant facts. Whilst the CJEU referred to d’Ambrumenil, it did not use the language of “principal purpose”.

Skatteverket v PFC Clinic AB Case C-91/12 (“PFC”) is a particularly important case and requires a close analysis. The services supplied by the trader were described at [12] and [13] as follows:

“12.

PFC offers medical services in the field of plastic surgery and cosmetic treatments. At the material time, it provided services involving both cosmetic and reconstructive plastic surgery and also some skincare services.

13.

PFC carries out procedures such as breast augmentation and reduction, breast lifts, abdominoplasty, liposuction, face lifts, brow lifts, eye, ear and nose operations and other plastic surgery. That company also offers treatments such as permanent hair removal and skin rejuventation by pulsed light, anti-cellulite treatments and botox and restylane injections.”

The CJEU described the purpose of these interventions as follows:

“18.

According to the order for reference, the purpose of the interventions carried out is, in certain cases, to treat patients who, as a result of an illness, injury or a congenital physical impairment, are in need of plastic surgery. In other cases, the interventions carried out are more as a result solely of the patient’s wishes to alter or improve his physical appearance. Irrespective of their purpose, and from a medical point of view, the various interventions are, according to the referring court, comparable services and can be carried out by the same personnel.”

The questions referred to the CJEU distinguished “plastic surgery” and “cosmetic treatments”. The CJEU described the questions which had been referred as follows:

“21.

By its questions, which it is appropriate to examine together, the referring court asks essentially whether art 132(1)(b) and (c) of the VAT Directive must be interpreted as meaning that the supply of services such as those at issue in the main proceedings, consisting of plastic surgery and cosmetic treatments, are exempt from VAT.

22.

Thus, by its second question, that court asks more specifically whether a preventive or therapeutic purpose for such services has any effect on the issue of whether they are exempt, which is the subject of the first question. If the answer is affirmative that court asks, by its third question, whether, in order to determine the existence of such a purpose, the subjective understanding the recipients of those services have of them must be taken into consideration. The fourth question asks what effect the fact that such services are supplied by licensed medical personnel has on the assessment to be carried out in the main proceedings.”

In considering the referred questions, the CJEU found as follows:

“25.

Accordingly, the concept of ‘medical care’ in art 132(1)(b) of the VAT Directive and that of ‘the provision of medical care’ in art 132(1)(c) are both intended to cover services that have as their purpose the diagnosis, treatment and, in so far as possible, cure of diseases or health disorders (see Future Health Technologies, paras 37 and 38).

26.

In that regard, it should be borne in mind that, whilst ‘medical care’ and ‘the provision of medical care’ must have a therapeutic aim, it does not necessarily follow that the therapeutic purpose of a service must be confined within a particularly narrow compass (see Future Health Technologies, para 40 and the case law cited).

27.

Accordingly, it is clear from the case law that medical services effected for the purpose of protecting, including maintaining or restoring, human health can benefit from the exemption under art 132(1)(b) and (c) of the VAT Directive (see Future Health Technologies, paras 41 and 42 and the case law cited).

28.

It follows, in the context of the exemption laid down in art 132(1)(b) and (c) of the VAT Directive, that the purpose of the services such as those at issue in the main proceedings is relevant in order to determine whether those services are exempt from VAT. That exemption is intended to apply to services whose purpose is for diagnosing, treating or curing diseases or health disorders or to protect, maintain or restore human health (Future Health Technologies, para 43).

29.

Thus, services such as those at issue in the main proceedings, in so far as their purpose is to treat or provide care for persons who, as a result of an illness, injury or a congenital physical impairment, are in need of plastic surgery or other cosmetic treatment may fall within the concept of ‘medical care’ in art 132(1)(b) of the VAT Directive and ‘the provision of medical care’ in art 132(1)(c) thereof respectively. However, where the surgery is for purely cosmetic reasons it cannot be covered by that concept.”

The CJEU then considered and rejected a submission by the tax authority that examination of the purpose of an operation or treatment would be extremely onerous. It noted at [33] that the health problems covered by the exemption could be psychological and then addressed the question of whether the subjective understanding of the recipient of the services must be taken into consideration:

“33.

As far as concerns whether the subjective understanding that the recipients of services, such as those at issue in the main proceedings, have must be taken into consideration in the assessment of the purpose of a specific intervention, which is the subject of the third question, it follows from the case law that the health problems covered by exempt transactions under art 132(1)(b) and (c) of the VAT Directive may be psychological …

34.

However, the subjective understanding that the person who undergoes plastic surgery or a cosmetic treatment has of it is not in itself decisive for the purpose of determining whether that intervention has a therapeutic purpose.

35.

Since that is a medical assessment, it must be based on findings of a medical nature which are made by a person qualified for that purpose.

36.

It follows that the fact, referred to in the fourth question, that services such as those at issue in the main proceedings are supplied or undertaken by a licensed member of the medical profession or that the purpose of such interventions is determined by such a professional, may influence the assessment of whether interventions such as those at issue in the main proceedings fall within the concepts of ‘medical care’ or ‘medical treatment’ within the meaning of art 132(1)(b) and (c) of the VAT Directive respectively.”

The CJEU stated its conclusion at [39]:

“39.

In light of all of the foregoing considerations, the answer to the questions referred is that art 132(1)(b) and (c) of the VAT Directive must be interpreted as meaning that:

— supplies of services such as those at issue in the main proceedings, consisting in plastic surgery and other cosmetic treatments, fall within the concepts of ‘medical care’ and ‘the provision of medical care’ within the meaning of art 132(1)(b) and (c) where those services are intended to diagnose, treat or cure diseases or health disorders or to protect, maintain or restore human health;

— the subjective understanding that the person who undergoes plastic surgery or a cosmetic treatment has of it is not in itself decisive in order to determine whether that intervention has a therapeutic purpose;

— the fact that services such as those at issue in the main proceedings are supplied or undertaken by a licensed member of the medical profession or that the purpose of such services is determined by such a professional may influence the assessment of whether interventions such as those at issue in the main proceedings fall within the concept of ‘medical care’ or ‘the provision of medical care’ within the meaning of art 132(1)(b) and (c) of the VAT Directive respectively”.

The CJEU in Frenetikexito – Unipessoal Lda v Autoridade Tributária e Aduaneira Case C‑581/19 (“Frenetikexito”) was concerned with a business managing and operating sports facilities which included promoting and supporting health and nutrition. The supplies included a nutrition monitoring service. The issue was whether there were single or multiple supplies, but the CJEU observed at the outset that the questions appeared to have been referred on the assumption that the supply of a nutrition monitoring service would fall within the exemption in Article 132(1)(c). The CJEU stated as follows:

“

26.

… supplies of a medical or paramedical nature carried out with the aim of protecting, including maintaining or restoring, the health of persons may benefit from the exemption provided for in Article 132(1)(c) of Directive 2006/112 (judgment of 5 March 2020, X (VAT exemption for telephone consultations), C‑48/19, EU:C:2020:169, paragraph 29 and the case-law cited).

…

30.

In that regard, it is not disputed that a nutrition monitoring service provided in a sports facility may, in the medium- and long-term or viewed very broadly, be a tool to prevent certain conditions, such as obesity. However, it must be noted that the same applies to exercise itself, the role of which is recognised, by way of example, as limiting the occurrence of cardiovascular diseases. Such a service therefore, in principle, has a health purpose but not, or not necessarily, a therapeutic purpose.

31.

Accordingly, where there is no indication that it is provided for purposes of prevention, diagnosis, treatment of a condition or restoration of health, and accordingly with a therapeutic purpose, within the meaning of the case-law cited in paragraphs 24 and 26 of the present judgment, which it is for the referring court to determine, a nutrition monitoring service, such as that provided in the case in the main proceedings, does not fulfil the criterion of an activity in the public interest common to all the exemptions laid down in Article 132 of Directive 2006/112 and, consequently, does not fall within the scope of the exemption laid down in Article 132(1)(c) of that directive, with the result that it is, in principle, subject to VAT.

32.

That interpretation does not contravene the fiscal neutrality principle, which precludes in particular two deliveries of goods or two supplies of services which are identical or similar from the point of view of the consumer and meet the same needs of the consumer, and which are therefore in competition with one another, from being treated differently with regard to VAT (see, to that effect, judgment of 17 December 2020, WEG Tevesstraße, C‑449/19, EU:C:2020:1038, paragraph 48 and the case-law cited), since, in the light of the objective pursued in Article 132(1)(c) of Directive 2006/112, nutrition monitoring services provided with a therapeutic purpose and nutrition monitoring services without such an objective cannot be regarded as identical or similar from the point of view of the consumer and do not fulfil the same needs on the part of that consumer.

33.

Any other interpretation would have the consequence of extending the scope of the exemption laid down in Article 132(1)(c) of Directive 2006/112 beyond the rationale reflected in the wording of that provision as well as the heading of Chapter 2 of Title IX of that directive. Any service performed in the exercise of a medical or paramedical profession, having, even in a very indirect or distant manner, the effect of preventing certain health conditions, would fall within the exemption laid down by that provision, which would not correspond with the intention of the EU legislature and the requirement that such an exemption be interpreted strictly, as recalled in paragraph 22 of the present judgment. As the Advocate General observed in point 61 of her Opinion, a merely uncertain link with a health condition, without a specific risk of health impairment, cannot suffice in that regard.”

The Court of Appeal decision in Mainpay is also an important case on which the FTT placed considerable reliance. Mainpay was an umbrella company providing doctors to agencies which in turn provided doctors to NHS Trusts. The FTT considered that control of the doctors lay with the NHS Trusts and held that Mainpay was making a supply of staff rather than a supply of medical care. This was upheld by the Upper Tribunal. Mainpay’s appeal to the Court of Appeal was on the basis that the FTT and the Upper Tribunal had applied the wrong test in determining whether the supply was a supply of medical care or a supply of staff. It argued that the medical exemption extended to a person such as Mainpay, who was facilitating medical services being provided by another person. This was a new argument which had not been pursued before the FTT or the Upper Tribunal. HMRC argued that the real issue was whether the services were supplies of medical care. If not, the appeal failed and it was not necessary to define the services as a supply of staff.

Whipple LJ gave the reasoned judgment, with which Green and Nugee LJJ both agreed. She held that the distinction between a supply of staff and a supply of medical care was a valid distinction. In order to distinguish between the two, it was relevant to consider the framework of control over the doctors in carrying out their work. That was described at [59] as “one factor relevant to the commercial and economic reality of the supplies made by Mainpay”.The Court of Appeal then went on to consider the meaning of the term “medical care”. It endorsed a comprehensive series of propositions identified by the Upper Tribunal at [89]. Insofar as relevant these were as follows:

“89.

The scope of the exemptions for medical care contained in art 132(1)(b) and (c) of the Directive (and its predecessor art 13A(1)(b) and (c) of the Sixth Directive) have been the subject of a number of decisions by the CJEU. The main principles can be summarised as follows:

(1)

The exemptions envisaged in art 13 of the Sixth Directive are to be interpreted strictly since they constitute exceptions to the general principle that VAT is to be levied on all services supplied for consideration by a taxable person …

(2)

Those exemptions constitute independent concepts of Community law whose purpose is to avoid divergences in the application of the VAT system from one Member State to another …

(3)

As regards the place where the services must be supplied, in contrast to art 132(1)(b) which concerns services encompassing a whole range of medical care normally provided on a non-profit-making basis in establishments pursuing social purposes such as the protection of human health, art 132(1)(c) applies to services provided outside hospitals and similar establishments and within the framework of a confidential relationship between the patient and the person providing the care, a relationship which is normally established in the consulting room of that person: Kügler at para 35 and EC Commission v UK (Case C-353/85) at para 33.

…

(6)

The concept of ‘provision of medical care’ does not lend itself to an interpretation which includes medical interventions carried out for a purpose other than that of diagnosing, treating and, in so far as possible, curing diseases or health disorders: D v W (Österreichischer Bundesschatz intervening) (Case C-384/98) [2002] STC 1200, [2000] ECR I-6795, at para 18.

(7)

Although the provision of medical care must have a therapeutic aim, it does not necessarily follow that the therapeutic purpose of a service must be confined within an especially narrow compass. Thus, medical services effected for prophylactic purposes may benefit from the exemption under art 132(1)(c). Even in cases where it is clear that the persons who are the subject of examinations or other medical interventions of a prophylactic nature are not suffering from any disease or health disorder, the inclusion of those services within the meaning of provision of medical care is consistent with the objective of reducing the cost of health care, which is common to both the exemption under art 132(1)(b) and that under (c) of that Article: D’Ambrumenil v Customs and Excise Comrs (Case C-307/01) EU:C:2003:627, [2005] STC 650, [2004] QB 1179 (‘d’Ambrumenil’), at para 58.

(8)

It is the purpose of a medical service which determines whether it should be exempt from VAT. Therefore, if the context in which a medical service is effected enables it to be established that its principal purpose is not the protection, including the maintenance or restoration, of health but rather the provision of advice required prior to the taking of a decision with legal consequences, the exemption under art 132(1)(c) does not apply to the service: d’Ambrumenil at para 60…”

Whipple LJ also recorded the following propositions:

“61.

… I record three basic propositions of law which are not in dispute:

(i)

First, the exemptions constitute independent concepts of Community law which must be placed in the general context of the common system of VAT (Kügler para 25).

(ii)

Secondly, the exemptions are to be interpreted strictly (but not restrictively) since they constitute exceptions to the general principle of taxation (Kügler para 28).

(iii)

Thirdly, the analysis of what is being supplied depends, in any given case, on economic realities of the transaction, that being a ‘fundamental criterion’ for the application of the common system of VAT (see Revenue and Customs Comrs v Airtours Holidays Transport Ltd [2016] UKSC 21, [2016] STC 1509, [2016] 4 WLR 87, at [48], citing Revenue and Customs Comrs v Loyalty Management UK Ltd, Baxi Group Ltd v Revenue and Customs Comrs (Joined cases C-53/09 and C-55/09) EU:C:2010:590, [2010] STC 2651, [2010] ECR I-9187, at paras 39–40); the contracts are the most useful starting point in that exercise, but not necessarily the end point: see WHA Ltd v Revenue and Customs Comrs [2013] UKSC 24, [2013] STC 943, [2013] 2 All ER 907. The UT recognised this approach in terms at UT [96], see para [33] above, and their encapsulation of the approach was not subject to any challenge in this appeal.”

Mainpay’s argument was that the legal form through which services were provided did not matter and that “mere involvement in a supply of medical services by qualified personnel” was sufficient to qualify for exemption. It relied on what was said by the CJEU in Kügler. The Court of Appeal rejected that argument.

The Court of Appeal then considered various other cases relied on by Mainpay in its argument that exemption could extend to “supplies higher up in a chain of transactions which ends in the delivery of care to a patient”. As part of that argument, Mainpay had relied on the principle of fiscal neutrality, contending that if a consultant had provided the same services on a self-employed basis then that supply would have been exempt. The Court of Appeal held that the cases relied on by Mainpay all turned on their own facts:

“76.

The answer given by Mr Singh [counsel for HMRC] to all of these cases is that the outcome in each turns on its own facts; together, these cases beg the question to be answered in this case, which is whether Mainpay's supplies were indeed of medical care so as to come within the medical exemption, or not. None of these cases provides a strong analogy on the facts. Further, Mr Singh relied on Klinikum Dortmund to emphasise that there are limits to the medical exemption, even where therapeutic medical supplies are involved, where fiscal neutrality is engaged and where there is a risk of increasing the cost of healthcare if exemption is not available…

…

78.

I accept [HMRC’s] answer on the CJEU cases. None of them carries Mainpay home. The facts of each are important to the CJEU's confirmation that the medical exemption applied (or, in the case of Klinikum Dortmund, did not).  It is the facts of this case, judged through the lens of commercial and economic reality, which determines whether Mainpay was making supplies of medical care, or not. It is to that issue which I now turn.”

In looking at the commercial and economic reality, the Court of Appeal rejected various arguments put forward by Mainpay as to how it had control over the doctors. Whipple LJ concluded at [83]:

With these authorities in mind, we turn to the Decision.