Pearl Chemist Limited v The Commissioners for Her Majesty's Revenue & Customs, TC 07104
| Jurisdiction | UK Non-devolved |
| Judge | Marilyn McKEEVER |
| Judgment Date | 23 April 2019 |
| Neutral Citation | [2019] UKFTT 0264 (TC) |
| Respondent | The Commissioners for Her Majesty's Revenue & Customs |
| Appellant | Pearl Chemist Limited |
| Reference | TC 07104 |
| Court | First-tier Tribunal (Tax Chamber) |
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[2019] UKFTT 0264 (TC)
TC07104
Appeal number: TC/2017/03135
VALUE ADDED TAX – zero rating - dispensing of medicines - prescrip-
tions written by UK registered and non-UK registered doctors - different
VAT treatment - interpretation of “registered medical practitioner” - UK
and EU approaches to construction - application of EU principle of fiscal
neutrality - “Marleasing” conforming construction
FIRST-TIER TRIBUNAL
TAX CHAMBER
PEARL CHEMIST LIMITED
Appellant
- and -
THE COMMISSIONERS FOR HER MAJESTY’S
Respondents
REVENUE & CUSTOMS
TRIBUNAL:
JUDGE MARILYN MCKEEVER
MR JOHN ADRAIN
Sitting in public at Taylor House, 88 Rosebery Avenue, London EC1R 4QU on 8
to 10 January 2019
Mr Tarlochan Lall Counsel, instructed by MHA MacIntyre Hudson, for the Ap-
pellant
Mr Peter Mantle, instructed by the General Counsel and Solicitor to HM Revenue
and Customs, for the Respondents
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DECISION
INTRODUCTION
1. Pearl Chemist Limited (“Pearl”) carries on the business of a pharmacy and dis-
penses prescriptions including private prescriptions. This appeal concerns
whether Pearl was entitled to zero rate certain of the supplies it made of prescrip-
tion medicines which were dispensed on private prescriptions.
2. HMRC assessed Pearl to VAT and interest in the sum of £156,782.41 by a notice
dated 15 April 2016. The assessment relates to VAT periods from 1 May 2012 to
30 May 2014. HMRC initially made their decision in a letter dated 6 April 2016.
Pearl applied for a review of that decision on 6 May 2016. The review was con-
cluded some ten months later by a letter from HMRC of 13 March 2017 and Pearl
appealed against that decision on 11 April 2017.
THE FACTS
3. The facts are not in dispute.
4. Mr Vijay Patel, who gave evidence at the hearing, is a qualified pharmacist and
started Pearl Chemist as a sole trader business in 2001. His brother is also a phar-
macist and they merged their businesses. The business grew and was incorporated
and became Pearl Chemist Limited in May 2012. Mr Patel and his brother are
directors of the company which owns 11 retail pharmacies and employs 11 phar-
macists in total.
5. In 2007, during the sole trader period, Pearl Chemist entered into a contractual
relationship with Hexpress Limited (“Hexpress”), a Guernsey company which
continued, following incorporation, until 2013.
6. Hexpress operated websites which offered medical screening and services, pri-
marily for conditions such as erectile dysfunction, hair loss and obesity/weight
loss. Hexpress contracted with a UK company, E-med Private Medical Services
Limited (“E-med”) to carry out the medical screening services. E-med employed
the doctors who actually carried out the screening.
7. Customers of Hexpress could undertake an online consultation with E-med’s doc-
tors. If the doctor decided to issue a prescription, the written prescription would
be sent to Pearl where it would be reviewed by a qualified pharmacist. Pearl
would then despatch the medicine directly to the individual customer on behalf
of Hexpress which would collect payment. Pearl issued an invoice at the end of
each month in respect of all the online orders fulfilled that month which Hexpress
would pay promptly.
8. Pearl had a similar arrangement with a Mauritian company called Gloxinia
(which was unrelated to Hexpress, but also used E-med to provide the medical
services) between 2010 and 2013. In this case, Pearl collected payment from the
customers on behalf of Gloxinia, retained an amount equal to its agreed fees and
remitted the balance to Gloxinia.
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9. Pearl treated all these supplies as zero-rated.
10. Initially, E-med employed only doctors registered in the UK with the General
Medical Council (“GMC”). At that time, only GMC registered doctors could
lawfully issue prescriptions which Pearl could dispense.
11. The law changed in 2008. The Medicines for Human Use (Prescribed by EEA
Practioners) Regulations 2008 (the “2008 Regulations”) provided that a UK phar-
macy, like Pearl, would be authorised to dispense medicines on the prescription
of a doctor who was lawfully engaged in medical practice in an EEA state, which
includes Norway, Iceland and Liechtenstein. Mr Patel was aware of the change
and assumed that the zero-rate would also apply to supplies made on the prescrip-
tion of an EU doctor.
12. The 2008 Regulations also allowed a doctor to issue prescriptions in electronic
form.
13. In June 2012 Hexpress introduced an electronic prescription service and E-med
began to provide EU registered doctors to provide the medical services. Before
the introduction of electronic prescriptions, it would not have been feasible to use
EU doctors as it would not have been possible to meet Hexpress’ next day service
promise if prescriptions had to be sent by post.
14. During the period to which the assessment relates, the relevant prescriptions were
mostly written by two doctors. Dr Poupalos was a qualified doctor registered with
the GMC in the UK. Dr El-Kharoubi was also a qualified doctor. He was not
registered with the GMC, but was appropriately registered and licensed to prac-
tice with the equivalent body in Romania. It appears from the copy prescriptions
included in our bundles that he actually practised in the Czech Republic, but there
was no suggestion that that affected the position.
15. Both doctors lawfully wrote prescriptions for identical medicines which Pearl
lawfully dispensed to customers of Hexpress and Gloxinia.
16. Hexpress’ customers were primarily based in the EU although there were a few
non-EU sales. Mr Patel indicated that about 60% of Hexpress’ customers were
UK based and the remaining 40% were based in other EU countries. This was the
case throughout the period in question. We do not have any figures for Gloxinia’s
customers.
17. In August 2014 Pearl was inspected by an officer of HMRC, who did not raise
any issue about the zero-rating of the supplies on the two doctors’ prescriptions
at the time. It was raised in correspondence with Pearl’s advisors after Pearl gave
details about the prescribing doctors.
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