Bio Oil Research Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 25 May 1994 |
| Date | 25 May 1994 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
Beecham Foods Ltd v C & E Commrs UNK(1972) 1 All ER 498
Duke of Buccleuch ELR(1889) 15 PD 86
Evans VAT(1976) 1 BVC 1050
R v Ramsgate (Inhabitants) ENR(1827) 6 B & C 712
Zero-rating - Drugs, medicines etc. - Evening primrose oil - Whether product "any goods" - Whether form a "prescription" - Meaning of "dispensed" - Value Added Tax Act 1983, Sch. 5, Grp. 14, item 1; Directive 77/388, the sixth VAT directive, Annex H, category 3.
The issue was whether evening primrose oil marketed as Naudicelle and available for purchase over the counter in a chemist was entitled to zero-rating when supplied on a doctor's prescription.
In 1974 the appellant launched on to the market the world's first evening primrose oil capsule under the brand name Naudicelle, having first obtained from the DSS a licence granted under the Medicines Act 1968. The product contained linoleic acid required for cell structure growth and other vital body functions. In particular, it was used as a dietary supplement in the management of multiple sclerosis. Evidence confirming the latter fact was given to the tribunal by a consultant eminent in this field.
In 1980 there was a change of policy by the company which at that time withdrew its application for a licence thus enabling it to market the product more widely and, in particular, by mail order. When sent out to purchasers the package contained an uncompleted form for signature by a qualified doctor and containing a space for completion of a patient's name and address.
Up until 26 August 1992 the commissioners permitted the zero-rating of the product, which was not available under the NHS, under Grp. 14 of Sch. 5 to the Value Added Tax Act 1983 however supplied. On that date they wrote to the appellant informing it that Naudicelle had no demonstrable medicinal properties and thenceforth would not be entitled to zero-rating even where prescribed by a medical practitioner.
The company appealed against this decision contending that the product complied fully with the requirements contained in Grp. 14.
The commissioners contended that the product did not amount to "goods" for the purposes of item 1 since these were restricted to medicines as defined in the Medicines Acts 1968. Further, the goods had not been "dispensed" and the form supplied with the product was not a "prescription" for the purposes of item 1 but merely a device to obtain the benefit of zero-rating. They drew attention to the description in Annex H to the Directive 77/388, the sixth VAT directive, of goods which could be the subject of reduced rates of tax and in particular category 3 being "pharmaceutical products of a kind normally used for health care, prevention of diseases and treatment for medical and veterinary purposes, including products used for contraception and sanitary protection". They conceded that Naudicelle was a "pharmaceutical product" but maintained that it did not come within the remainder of the description.
Held, allowing the company's appeal:
1. Had the legislature intended to restrict the meaning of "any goods" in item 1 to "medicinal products" as defined in the Medicines Act 1968 it would have included in it that definition. The description of eligible products in category 3 of Annex H was to be contrasted with the reference in s. 130 of the Medicines Act 1968 to substances "used by being administered … for a medicinal purpose". A wide construction of the phrase "any goods" was to be used.
2. Given the evidence of the expert witness that Naudicelle was normally used for health care and treatment for medical purposes the product came within the definition in item 1 of Grp. 14 of Sch. 5 to the Value Added Tax Act 1983.
3. The word "dispensed" had changed over the years from meaning the combining of various elements to supplying a wide range of goods manufactured by pharmaceutical companies. The goods in question were "dispensed" by pharmacists when supplied by them.
4. The forms supplied with the goods when sent by mail order required the same information as that contained in para. 12 of the Medicines (Products other than Veterinary Drugs) (Prescription Only) Order 1983 (SI 1983/1212) relating to the contents of NHS prescriptions. Unchallenged expert evidence had been given that they were prescriptions and this was accepted by the tribunal.
[The tribunal set out the facts summarised above and continued as follows]
In her submissions, Miss Fletcher [for the commissioners] made three claims, namely:
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(2) that Naudicelle did not constitute "any goods" for the purposes of item 1: "any goods" was restricted to medicines as defined in theMedicines...
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