Mainpay Ltd v Revenue and Customs Commissioners
| Jurisdiction | UK Non-devolved |
| Neutral Citation | [2021] UKUT 270 (TCC) |
| Year | 2021 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2021] UKUT 270 (TCC)
Mr Justice Mellor, Judge Guy Brannan
Upper Tribunal (Tax and Chancery Chamber)
Value added tax – Exemption – Placing of consultants and GP specialists indirectly to NHS – Whether an exempt supply of medical care – VATA 1994, Sch. 9, Grp. 7 – EC Directive 2006/112, art. 132 – No – Appeal dismissed.
The Upper Tribunal (UT) upheld a decision of the First-tier Tribunal (FTT) that the placing of medical practitioners, through an intermediary, into the NHS was not an exempt supply of medical care.
The Upper Tribunal (UT) upheld the decision of the FTT in Mainpay Ltd [2020] TC 07690 and found the placing of medical practitioners into the NHS through an intermediary did not fall within the exemption for medical care provided by VATA 1994, Sch. 9, Grp. 7.
Mainpay employed, or treated as employed, various consultants and GP specialists who were placed with hospitals. The individuals involved were all registered in the register of medical practitioners, and it was not disputed all of them provided care within hospitals.
Mainpay did not supply its medical practitioners directly. They were supplied to an intermediary, A&E, who then supplied them to various hospitals. Mainpay was described, in an agreement with A&E, as an umbrella company that employed and assigned the services of its employees to work on projects for third parties.
Typically, an agency such as A&E would identify an assignment which they would introduce to a consultant registered with them. If the consultant agreed to the assignment, A&E would inform Mainpay and, once the assignment was accepted by the consultant, A&E would provide an assignment schedule. Mainpay would communicate with the consultant in relation to payroll matters. They were obliged to deliver weekly timesheets to the client (hospital) for approval and return those to A&E, and to issue invoices in accordance with the assignment schedule.
The client paid the agency, the agency paid Mainpay, and Mainpay operated a payroll system to pay the consultant. Mainpay would not have any knowledge, however, where in the hospital the consultant was working or what hours the consultant worked on any specific day. The FTT concluded the perception of consultants would have been that Mainpay was simply providing a tax efficient payroll function.
The FTT decided that in relation to the supply of consultants' services, Mainplay supplied staff and not medical care and that supply was standard rated for VAT purposes. The FTT was not satisfied the position was any different in relation to GP specialists and therefore dismissed the taxpayer's appeal.
Mainpay was granted permission to appeal on six grounds which are all set out in the decision (paras. 75–87). The UT noted the nature and characterisation of a supply was a matter of contractual interpretation viewed in the light of commercial and economic reality and involved a consideration of all the relevant facts and circumstances in which the supply took place.
It was satisfied the FTT had taken account of all the relevant circumstances and paid close attention to the contractual obligations of the parties. It did not accept the FTT had formulated the wrong test in relation to “control” or that it had misapplied its own test, as alleged by Mainpay. The FTT had concluded that the relevant test was not whether there was a transfer of control over clinical decision-making, but over the way in which the consultant worked. The FTT had not erred in its analysis and the UT, therefore, had no basis on which to interfere with its conclusion.
The UT also rejected an alternative argument that, if the medical practitioners exercised control over clinical decision-making, under Directive 2006/112, art. 10, the activities of those practitioners were attributed to the economic activity of Mainpay so that Mainpay supplied clinical decision-making.
The UT confirmed art. 10 was intended to prevent the activities of employees constituting an independent economic activity, but while it was true the activities of the employee are treated as part of the economic activities of the employer that did not mean every characteristic of the employee, in this case the clinical decision-making, was deemed to belong to the employer. It was impossible to say that Mainpay, an entity with no medical qualification or expertise, exercised any degree of control over the clinical decision-making and art. 10 did not deem it to do so.
The UT concluded the exemption in art. 132(1)(c) and VATA 1994, Sch. 9, Grp. 7 did not apply to the supplies made by Mainpay and the appeal was dismissed.
While many of the cases dealing with this issue have focussed on the issue of control in the decision-making process, in this case it was clear neither Mainpay, A&E nor the NHS Trusts could have any control over the highly specialised medical practitioners' clinical decisions.
It was, however, established that the consultants operated within the remit of the local policies of the NHS Trust. Mainpay, on the other hand had no contact with the consultants on medical or professional matters and was not involved in any aspect of their day-to-day work. This transfer of operational control was one of the key factors in this decision.
Michael Firth, counsel, appeared for the appellant
Jennifer Newstead Taylor, counsel, instructed by the General Counsel and Solicitor to HM Revenue & Customs, appeared for the respondents
[1] The Appellant, Mainpay Limited (“Mainpay”), appeals against the decision (“the Decision”) of the First-tier Tribunal (Judge Cannan and Mr Stafford) (“the FTT”) on 29 April 2020 dismissing Mainpay's appeal.
[2] The question in this appeal is whether Mainpay is supplying medical care within the meaning of Group 7 Schedule 9 Value Added Tax Act 1994 (“VATA”), so that its supplies are thus exempt from VAT, or whether it is making a standard rated supply of staff.
[3] Mainpay supplied medical consultants (“consultants”) and specialist general practitioners (“GP Specialists”) to an intermediary company – an agency – called Accident & Emergency Agency Limited (“A&E”). A&E then supplied the consultants and GP Specialists to various hospital clients, generally NHS Trusts. The supplies which are the subject of this appeal were made in the period 1 November 2010 to 31 January 2014 (“the Relevant Period”).
[4] The FTT held that Mainpay's supplies were not exempt from VAT but were, instead, standard rated. Mainpay now appeals that decision on six Grounds of Appeal, with the permission of the FTT on the first five Grounds and the permission of this Tribunal on the sixth.
[5] References in square brackets in this decision are references to the Decision unless the context otherwise requires. References to the Court of Justice of the European Union (“ECJ”) include references to the European Court of Justice of the European Communities.
[6] For the reasons given below, we dismiss this appeal.
[7] The Principal VAT Directive 2006/112/EC (“the Directive”) makes provision in article 132(1)(b) and (c) (superceding article 13(A)(1) Sixth Directive) for the exemption from VAT of certain transactions:
1. Member States shall exempt the following transactions:
- …
- (b) hospital and medical care and closely related activities undertaken by bodies governed by public law or, under social conditions comparable with those applicable to bodies governed by public law, by hospitals, centres for medical treatment or diagnosis and other duly recognised establishments of a similar nature;
- (c) the provision of medical care in the exercise of the medical and paramedical professions as defined by the Member State concerned …
[8] Effect is given to these exemptions in Group 7 of Schedule 9 to VATA. Items 1(a) and 4 of Group 7 provide exemptions which are relevant to this appeal as follows:
1. The supply of services [consisting in the provision of medical care] by a person registered or enrolled in …
- the register of medical practitioners
4. The provision of care or medical or surgical treatment and, in connection with it, the supply of any goods, in any hospital or state regulated institution.
[9] Finally, article 10 of the Directive provides:
The condition in article 9(1) that the economic activity be conducted “independently” shall exclude employed and other persons from VAT in so far as they are bound to an employer by a contract of employment or by any other legal ties creating the relationship of employer and employee as regards work conditions, remuneration and employer's liability.
[10] The following summary of the facts is based on the Decision at [24]–[99]. The primary facts were not in dispute.
[11] Mainpay employed, or treated as employed, various doctors. 80% of the doctors which it placed indirectly with hospitals were consultants and the remaining 20% were GP Specialists. It is not in dispute that all the medical practitioners to whom this appeal relates were registered on the register of medical practitioners and that the care provided by those medical practitioners was provided in hospitals: see [9].
[12] The operation of Mainpay's payroll, including the processing of workers' timesheets, its invoicing and bookkeeping were outsourced to a company called Accuco Ltd (“Accuco”), which prepared payment information in accordance with which Mainpay made payments to its consultants and GP Specialists. Accuco also provided a sales support function, dealing with day-to-day employee matters such as maternity pay, maternity leave and pension payments. A second company, called Awakino Ltd was responsible for signing up workers to Mainpay's services. Doctors were generally introduced to Mainpay by a recruitment agency, such as A&E, or by word of mouth.
[13] As we have indicated, Mainpay did not supply its medical practitioners directly to hospitals but did so via A&E. There were...
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Mainpay Ltd v The Commissioners for HM Revenue and Customs
...COURT OF APPEAL (CIVIL DIVISION) ON APPEAL FROM THE UPPER TRIBUNAL (TAX AND CHANCERY CHAMBER) MR JUSTICE MELLOR AND JUDGE GUY BRANNAN [2021] UKUT 0270 (TCC) Royal Courts of Justice Strand, London, WC2A 2LL Michael Firth (instructed by direct access) for the Sarabjit Singh KC and Jennifer Ne......