Beynon and Partners v Commissioners of Customs and Excise
| Jurisdiction | UK Non-devolved |
| Judgment Date | 05 June 2001 |
| Date | 05 June 2001 |
| Court | Value Added Tax & Duties Tribunal |
VAT Tribunal
The following cases were referred to in the judgment:
Bophuthatswana National Commercial Corp Ltd v C & E CommrsVAT[1993] BVC 194
Card Protection Plan Ltd v C & E Commrs VAT[2001] BVC 158
C & E Commrs v British Telecommunications plcVAT[1999] BVC 306
C & E Commrs v FDR Ltd VAT[2000] BVC 311
C & E Commrs v Leightons Ltd VAT[1995] BVC 192
C & E Commrs v Madgett (t/a Howden Court Hotel) VAT(Joined Cases C-308/96 and C-94/97) [1998] BVC 458
C & E Commrs v Wellington Private Hospital LtdVAT[1997] BVC 251
EC Commission v United Kingdom VAT(Case 353/85) (1988) 3 BVC 265
Supply - General medical practitioners supplying pharmaceutical services to patients under reg. 20 of National Health Service (Pharmaceutical Services) Regulations 1992 - Whether supplies of drugs and appliances separate zero-rated supplies of pharmaceutical services or part of composite supplies of exempt medical services - Value Added Tax Act 1994, Value Added Tax Act 1994 schedule 8 group 12Sch. 8, Grp. 12, item 1A(a) andValue Added Tax Act 1994 schedule 9 group 7Sch. 9, Grp. 7, item 1(a).
The issues were whether a supply of drugs dispensed and personally administered to a patient under reg. 20 of National Health Service (Pharmaceutical Services) Regulations 1992 was zero-rated under item 1A(a) of Value Added Tax Act 1994 schedule 8Grp. 12 of Sch. 8 to the Value Added Tax Act 1994; and whether drugs personally administered to a patient constituted a separate supply or part of a single supply of medical services exempt under item 1(a) ofValue Added Tax Act 1994 schedule 9 group 7Grp. 7 of Sch. 9 to the Act.
The appellants carried on business as general practitioners from surgery premises in Humberside. In order to accommodate rural patients who did not have access to a pharmacy, known as "regulation 20 patients", the appellants, through the National Health Service, provided pharmaceutical services. These services were zero-rated for VAT purposes. However, whereas the appellants maintained that the drugs and appliances they provided and personally administered to reg. 20 patients constituted zero-rated supplies of pharmaceutical services, the commissioners contended that the provision of such drugs or appliances was part of a single supply of medical services which was exempt from VAT. Alternatively, the commissioners contended that a drug or appliance so administered formed a separate supply which was standard-rated. The disputed decision of the commissioners was given on 19 September 1997 and was appealed on 7 October 1997. However, the appeal was stood over to await the outcome of Woodings No. 16,175; [2000] BVC 2032. The tribunal found in favour of the appellants in that case, but the commissioners determined that the decision had been reached on the particular facts of the case and announced in Business Brief 22/99 that the effects of the decision were limited to the appellants alone. The appellants in the present case considered their situation to be factually indistinguishable from the earlier Woodings case and were not prepared to be dealt with differently. Consequently, the appeal proceeded. The tribunal heard how the appellants provided pharmaceutical services to those patients who qualified for services under reg. 20. They dispensed "takeaway" items, that is those ordinarily prescribed under reg. 20 and not personally administered, through the dispensary situated in the surgery. On receipt of the prescription, the doctor or a trained dispenser issued the drugs or other items to the patient. Where the prescribed drug was to be personally administered to a reg. 20 patient, the doctor obtained it from the dispensary and took it back to the consulting room to administer. It was inferred by the tribunal that where a doctor administered a drug to a non-reg. 20 patient, he did not prepare a prescription as there was nothing to be dispensed; he simply took the drug from stock and administered it. Most of the drugs personally administered by a doctor were vaccines.
The appellant submitted that the supply of all drugs and appliances by a doctor to a reg. 20 patient was zero-rated under item 1A of Grp. 12; that the supply of all drugs and appliances by a doctor to any patient was a separate supply from that of the doctor's medical services, except for items which were indissociable such as a sticking plaster; and that the supply of drugs by a chemist whether or not for personal administration by a doctor was zero-rated under item 1 of Grp. 12.
The commissioners argued that reg. 20 empowers doctors to stand in for a pharmacist and pharmacists have no power to administer drugs or to give treatment. All a doctor is required to do under this regulation is to record the drugs prescribed on a prescription form and provide a container for them. Regulation 20 did not incorporate a supply of medical care. The commissioners submitted that by tethering the right to zero-rate first to goods and then to goods supplied under reg. 20, Parliament had intended to permit zero-rating to be claimed for goods supplied as a result of, or in the course of, a supply of pharmaceutical services. Parliament could have tethered zero-rating to goods supplied to persons requiring immediate treatment, or to persons on a doctor's reg. 20 panel, but it chose not to do so. In the commissioners' view, by this action Parliament recognised the distinction evident in various pieces of health legislation between supplies of pharmaceutical services and the provision of medical care.
On the question of classification, the commissioners submitted that in order to find that there were two separate supplies, the tribunal must be satisfied that the goods element for a typical patient was an end in itself. If it could not find that the goods were free-standing, then it must conclude that the supply was ancillary to the main supply of medical services. The commissioners submitted in the alternative that, if they were wrong as to the classification, the supplies of drugs and appliances personally administered by the appellants were standard-rated; they were not goods supplied in accordance with a requirement or authorisation under reg. 20.
Held, dismissing the taxpayers' appeal:
1. The appellants' submission that reg. 19 should be divided so that reg. 19(b) stands apart from reg. 19(a) and reg. 20 was rejected. Both the provision of immediate treatment and the personal administration of medicinal products formed an integral part of a GP's obligation to provide medical services to his patients. That reg. 19 stands as a whole was evidenced by the fact that both subsections applied to all GPs whether or not they had a reg. 20 panel of patients.
2. Appellants' claim that any person can administer an injection to another person, provided that other person has given informed consent, was also rejected. Section 67 of the Medicines Act 1968 made it a criminal offence for a person other than an appropriate practitioner, or someone acting in accordance with his directions, to administer a medicinal product.
3. Appellants had submitted that the policy behind item 1A of Grp. 12 was to provide a level playing field in VAT treatment between pharmacists and doctors who dispense to reg. 20 patients so that all medicinal products prescribed by both groups were zero-rated. However, there was no reason for a level playing field. If the level playing field argument was to play any part in this appeal, it should be between doctors providing personally administered drugs to reg. 20 patients and non-reg. 20 patients. Those in the latter category made exempt supplies of medical services and there should be no reason to treat them differently from those in the former category.
4. Drugs or appliances personally administered by a doctor are not supplied in accordance with a requirement or authorisation under reg. 20 and, if supplied separately from supplies of medical services, they do not qualify for zero-rating under item 1A of Grp. 12. They are supplied in accordance with reg. 19, which was not incorporated into item 1A or any other provision of Grp. 12.
5. Notwithstanding that the appellants may prescribe and dispense drugs and appliances which they personally administer to their reg. 20 patients, such supplies must, for VAT purposes, be treated in the same way as supplies of drugs and appliances provided and personally administered to non-reg. 20 patients.
6. On the issue of whether the supply of drugs personally administered to a patient should be classified as a separate supply of pharmaceutical services or as part of a single composite supply of medical services, it was clear that the dominant purpose of the provision and personal administration of the drugs by the appellants to their reg. 20 patients was as part of a single supply of medical services and, thus, the supply was exempt from VAT.
[The tribunal set out the facts summarised above and continued as follows.]
5. The legislation dealing with the supply of medicines, and the supply of medical services and pharmaceutical services through the National Health Service is to be found in a wide variety of Acts of Parliament and statutory instruments. For the purposes of the instant appeal it is necessary for us to deal with but a small part of it, and this is an appropriate point in our decision to do so. The following is the legislation both to which we were referred and to which we find it necessary to make reference. Not all of it is relevant to our conclusion.
6. The manufacture, importing and wholesaling of medicinal products are covered by Pt. II of the Medicines Act 1968, which is entitled "Licences and Certificates relating to Medicinal Products". Under the sub-heading of "General provisions and exemptions", s. 7 and 9 appear. In selectively comminuted form they provide as follows:
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7(1) The following provisions of this section shall have effect...
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