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

The FTT set out the law at [6] to [36] of the Decision. This included reference to what the Court of Appeal had said in Mainpay, including at [61] and the Upper Tribunal’s summary at [89] which had been endorsed by the Court of Appeal. The judgment of the Court of Appeal in Mainpay was handed down after the FTT hearing and the FTT therefore invited the parties to make further written submissions on Mainpay. The FTT noted that the Appellant expressly agreed with and adopted the Court of Appeal’s reasoning at [76] and [78], quoted above. The FTT then stated:

“27.

We agree. Those paragraphs of the Court of Appeal's decision endorse (unsurprisingly) a decision-making approach which should be informed by a strong focus on the facts of the case. The Court of Appeal accepted a submission that the outcome of many of the reported decisions can be seen to have been influenced by the particular facts, judged (as the Court of Appeal said) "through the lens of commercial and economic reality" so as to determine whether the appellant is making supplies of medical care or not.

28.

We are bound by the Court of Appeal's analysis of Item 1 (as well as, so far as adopted by the Court of Appeal, the Upper Tribunal's analysis). We remind ourselves that we (as a fact-finding Tribunal) must focus on the facts, and that, as part of our overall evaluative exercise, we should not forget to look at the facts through the lens of commercial and economic reality (which is an approach regularly encountered in relation to VAT). That is what we have done.”

The FTT went on to consider a number of previous decisions of the FTT on the exemption for medical care.

The FTT discussed the issues at [63] – [118] and concluded with “no hesitation” that the Appellant’s services were not exempt. We summarise the FTT’s reasoning in reaching that conclusion as follows, with appropriate references to paragraphs in the Decision.

It is worth quoting [63] – [70] in full because the FTT was heavily influenced by its view as to what diagnosis involves:

“63.

Dr Shotter holds a number of medical degrees, beginning with an MBChB in medicine and surgery from the University of Leeds. HMRC accept that Dr Shotter is a skilled and ethical professional. We agree. She is committed to her work and the business which she directs. She is a determined and competent business person. She established the Appellant, has applied a clear-eyed business vision to it, and has been the driver of its growth and success.

64.

But we have no hesitation in deciding that the services which the Appellant offers are not exempt within the proper meaning and effect of the legislation.

65.

We do not accept that what is being done is "diagnosing, treating and, in so far as possible, curing diseases or health disorders".

66.

According to the Oxford English Dictionary, "diagnosis" is "determination of the nature of a diseased condition; identification of a disease by careful investigation of its symptoms and history; also, the opinion (formally stated) resulting from such investigation."

67.

There is very little evidence of diagnosis in the above sense. Diagnosis in the above sense did not invariably take place even in relation to the small number of clients for whom we were provided with details.

68.

The weight of the evidence - written and oral - is that people are not using the Appellant's services because of diagnoses - arrived at following careful investigation of symptoms and history, by an appropriately qualified medical practitioner, in an appropriate setting - but rather simply because they want to use the Appellant's services.

69.

Put differently, the catalyst for use of the Appellant's services is not "diagnosis", but is something else instead. Although we perhaps do not need to go further, the evidence is that people are actuated to use the Appellant's services because they want to - not because they are encouraged to do so by a medical practitioner.

70.

This is very important to the overall analysis because diagnosis is the starting point of medical care, and the backdrop against which medical treatment takes place. Without diagnosis, "treatment", in the sense captured by the exemption, is not something which is being done responsively to a disease or a health disorder. It is an activity which is being done 'untethered' from an anterior diagnosis.”

The FTT made some observations at [71] – [82] in relation to the quality of the documentary evidence before it, describing it at [78] as “sparse and unrevealing”. We have quoted at [10] above what the FTT said at [84] – [89] based on the documentary evidence it did have.

The FTT went on to consider the contemporary documentary records of consultations and concluded at [96] in terms of “documentary product” that it would not describe the clinic as a healthcare setting or its activities as healthcare activities.

Dr Shotter’s training and experience was considered at [100] – [102], including her experience of psychiatry and psychology. Her evidence as to dealing with clients suffering from depression or anxiety who wished to feel better about their appearance was considered at [106] – [111]. It was not suggested before us that the Appellant’s case was or had been that its treatments amounted to medical care because they either improved the mental health of clients or prevented clients from suffering more serious mental health issues.

The broad thrust of the FTT’s conclusions is set out at [104], [105], [112] and [113]:

“104.

Standing back, people are going to the clinic intending to have a cosmetic procedure done there. Even if they are unhappy with their appearance, they are not going to the clinic to see, or expecting to see, a psychiatrist, a counsellor or a therapist. The service being provided is and remains a cosmetic procedure even if (for example) it is being done by a person who is a good listener, or has the training and/or experience to engage with people's psychological or emotional needs.

105.

The cosmetic treatments are not being provided essentially for medical purposes, but are for non-medical - cosmetic - purposes. The fact that people go to the clinic feeling unhappy with some aspect of their appearance, and (at least sometimes) are happier when something is done at the clinic about that aspect of their appearance, does not mean that the treatment is medical, or has a therapeutic aim. So, by way of example, the so-called 'localised fat reduction' - a technology-led targeting of fat pads which (in Dr Shotter's words) "can cause all sorts of problems confidence-wise and in terms of comfort" - is not the same as a weight-loss service.

…

112.

Helping someone to achieve goals in relation to their appearance - which is what this clinic does - is not treating someone's mental health status, but is going to their self-esteem and self-confidence. It is a misuse of language to say that this is healthcare in the sense that it would fall within Item 1.

113.

We do not regard what is being done as "medical care", "coming within the established meaning of that term". Although what is done is being done with care, it is not, in our view, "medical". Nor do we accept that the services "have a therapeutic aim, that they consist of the diagnosis, treatment or cure of disease or ill-health." We agree with HMRC that clients sought the clinic's services primarily for aesthetic reasons, and in order to improve their appearance.”

The FTT concluded that the Appellant’s supplies did not constitute medical care and that HMRC had been correct to refuse repayment of VAT and to make the assessment for period 12/16.