Skin Rich Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 06 August 2019 |
| Neutral Citation | [2019] UKFTT 514 (TC) |
| Date | 06 August 2019 |
| Court | First-tier Tribunal (Tax Chamber) |
[2019] UKFTT 514 (TC)
Judge Jeanette Zaman, Rayna Dean
Gary Brothers, of The Independent Tax & Forensic Services LLP, appeared for the appellant
Gareth Hilton, litigator of HM Revenue and Customs' Solicitor's Office, appeared for the respondents
Value added tax – Botox treatments and other injectables – Fungal nail treatments – Whether exempt – VATA 1994, Sch. 9, Grp. 7, items 1,2 and 4 – Whether medical care – Principal purpose – Whether a state regulated institution – No – Appeal dismissed.
The First Tier Tribunal (FTT) dismissed an appeal by the taxpayer that botox services and fungal nail treatment supplied by them were properly exempt under VATA 1994, Sch. 9, Grp. 7, items 1 and 2, or alternatively item 4. The FTT was not persuaded the services were principally to protect, restore or maintain the health of an individual. They did not, therefore, meet the definition of medical care established by the relevant caselaw. Furthermore, they did not consider the taxpayer to be “state regulated” as required by item 4.
Skin Rich Ltd (SRL) operated a skin culture and aesthetics clinic offering a range of specialist skin treatments including, but not limited to, botox and dermal filler treatments or “Injectables” and fungal nail treatments they believed were exempt from VAT.
SRL employed several medical professionals to administer the injectables arguing it was a medical procedure and exempt under VATA 1994, Sch. 9, Grp. 7, items 1 and 2. It was not enough, however, that the services were provided by persons registered as appropriate, they had to be providing medical care in order to meet the terms of the exemption. Their principal purpose had to be the protection, including the maintenance or restoration of health. Whilst it was conceded a cosmetic benefit would not preclude a treatment having a primary purpose to protect, restore or maintain the health of an individual, the FTT was not satisfied, on the facts of this case, that such a purpose had been established.
The fungal nail treatment involved the use of a medical grade laser. Although it was noted the treatment of nail fungus could, theoretically, be medical care the treatment, in this instance, was not administered by a health professional and there was no evidence before the tribunal of the treatment being sought for a medical condition.
Finally, the permission granted to SRL under the Town and Country Planning Act 1990 for a change of use to a D1 designation, subject to annual licensing and inspection, was for planning purposes only and did not involve any oversight of the treatments in the clinic. SRL were not “approved, licensed, registered or exempted from registration” for the purposes of item 4.
Neither the injectables nor the fungal nail treatment could be exempt from VAT and the appeals in relation to each were dismissed.
It was noted in this decision the treatments being administered could, in other circumstances, potentially meet the exemption criteria but the context was critical and the tribunal could only consider the evidence before it.
[1] This is an appeal by Skin Rich Ltd (“SRL”) against:
- the decision of Officer Amies of HMRC dated 23 March 2017 that supplies of botulinum toxin (Botox) and nail fungus treatment are not exempt under Group 7 (Group 7) of Schedule 9 to Value Added Tax Act 1994 (VATA 1994) (this being the liability decision); and
- assessments issued under s73(1) VATA 1994 on 6 April 2017 for the periods 5/13 to 11/16 totalling £21,064.
[2] HMRC had identified that there was a difference between the turnover in the accounts used for corporation tax purposes and the amounts reported in the VAT returns. SRL's accountant explained that treatments which SRL regarded as exempt under Group 7 were not included in the VAT return. This explanation of the discrepancy was accepted by HMRC on 7 August 2016, but the question of whether Botox and nail fungus treatments were exempt was referred for consideration within HMRC.
[3] Following the compliance check, Officer Amies sent the liability decision to SRL and issued assessments. These assessments were notified by Officer Amies to SRL on 23 March 2017 and initially comprised the following:
| Period | Amount (£) |
| 02/13 | 464 |
| 05/13 | 1,625 |
| 08/13 | 1,450 |
| 11/13 | 3,345 |
| 02/14 | 2,286 |
| 05/14 | 1,451 |
| 08/14 | 1,407 |
| 11/14 | 948 |
| 02/15 | 861 |
| 05/15 | 665 |
| 08/15 | 1,372 |
| 11/15 | 1,033 |
| 02/16 | 1,038 |
| 05/16 | 1,327 |
| 08/16 | 1,343 |
| 11/16 | 913 |
[4] SRL requested a review of the liability decision and the assessments. On 21 July 2017 HMRC sent a review conclusion letter to SRL, which concluded that the liability decision should be upheld. However, the review found that the assessment for the period 02/13 was out of time and HMRC removed that period from the assessment.
[5] The Notice of appeal refers to the review conclusion letter which states that Botox and nail fungus treatment cannot be considered as exempt as HMRC do not consider them to be medical treatments, and the Notice then states that the grounds for appeal are that:
- Botox is a medical procedure and SRL employs members of the medical profession to administer and supervise it in all instances; and
- nail fungus treatment is also a medical treatment as it is carried out to restore the health of the person concerned as GPs now advise their patients to seek private practices as the NHS is over-stretched.
[6] SRL stated that the desired outcome was for Botox and nail fungus treatment to be treated as exempt from VAT.
[7] At the hearing Mr Brothers confirmed that (in addition to nail fungus treatment) SRL had claimed exemption for Botox treatments and dermal fillers, which were together classified by SRL as “Injectables” or “Injectable treatments”. The assessments raised by HMRC had covered all Injectables, not just Botox treatments, (as HMRC had treated all supplies for which exemption had been claimed as standard-rated) and SRL were seeking to appeal these assessments in respect of all Injectables.
[8] We considered that this was a late amendment to the grounds of appeal. We noted that the correspondence between SRL and HMRC in relation to the compliance check had referred to Botox treatment, and this was then reflected in the liability decision, the review and the Notice of appeal. Nevertheless, the bundle of papers provided to us did include material relating to both Botox and fillers, and Mr Hilton stated that HMRC had no objection to this amendment. On the basis that HMRC were satisfied that they had been able to prepare appropriately, we concluded that we should, in the interests of fairness and justice, allow this amendment.
[9] In addition, during the course of the hearing, Mr Brothers explained that SRL would not be seeking to rely on items 1 and 2 of Group 7 (“Item 1” and “Item 2”) in relation to the nail fungus treatment but was relying only on item 4 of Group 7 (“Item 4”) in relation thereto. Exemption under Item 4 would also be relied on as an alternative argument in respect of the Injectables.
[10] The liability decision of Officer Amies refers to the requirements of Item 1, but expresses the conclusion more broadly as “you have failed to provide the necessary evidence for your supplies to be classified as “medical” and thus exempt from VAT. I will now raise an assessment for VAT on these supplies which should have been standard rated for VAT purposes.” The grounds of appeal had not specified which items of Group 7 were sought to be relied upon by SRL, but the skeleton argument submitted by Mr Brothers had addressed only Items 1 and 2. Mr Hilton informed us that, to the extent that this was a further amendment to the grounds of appeal, HMRC had no objection.
[11] We concluded that the original grounds had not expressly limited themselves to any particular items within Group 7, albeit that the phrasing did imply that Items 1 and 2 were in mind. We concluded that, in the interests of fairness and justice, it was appropriate to allow this amendment. Both parties were able to address the evidence they regarded as relevant to Item 4 during the hearing, and we invited both parties to provide us with written submissions after the hearing on the scope of Item 4, in particular the meaning of “state-regulated”. We received written submissions from both parties and have considered these in reaching our decision.
[12] We have made the following findings based on the bundle of papers provided to us and the evidence we heard from Miss Farah Cleaver, Dr Sheena Lalani and Officer Amies (each of whom had provided witness statements) on which they were cross-examined. Additional findings of fact are set out in the Discussion.
[13] SRL operates a skin culture and aesthetics clinic in Richmond which offers a range of specialist skin treatments, including acne and rosacea treatment, non-surgical facelifts, nail fungus treatment, tattoo removal, skin peels and Injectable treatments.
[14] SRL's accountant, Mrs Katherine James, applied to Richmond Council for permission fo the local planning authority to develop the land at 7 Hill Street, Richmond (the premises on which SRL operates the clinic) for change of use of the second floor from D2 to D1 (health and beauty clinic). That application was granted by Richmond Council, subject to conditions, on 24 May 2012. The conditions were:
- development must begin within three years of the date of the permission;
- none of the buildings can be occupied until arrangements for the storage and disposal of waste have been made and approved by the local planning authority;
- no waste shall be left or stored on the site other than within a building or refuse enclosure;
- customers shall not be present on the premises before 9am and after 8pm;
- the premises shall not be used for any purposes other than for a health and beauty...
To continue reading
Request your trial
-
Aesthetic-Doctor.Com Ltd
...decade or so: (in date order) Ultralase Medical Aesthetics Ltd[2010] TC 00142 (Judge David Porter and Ms Ann Christian); Skin Rich Ltd[2019] TC 07310 (Judge Jeannette Zaman and Mrs Rayna Dean); Window to the Womb (Franchise) Ltd [2020] TC 07687[2020] UKFTT 201 (TC) (Judge Jonathan Cannan). ......
-
Window to the Womb (Franchise) Ltd and Others
...no evidence that the supply benefits a woman's mental health. [21] I was referred in passing to the decision of the FTT in Skin Rich Ltd [2019] TC 07310 where it was held that supplies of botox and other injectable treatments were not exempt because the principal purpose was not to protect,......