Woodings
| Jurisdiction | UK Non-devolved |
| Judgment Date | 13 July 1999 |
| Date | 13 July 1999 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following cases were referred to in the decision:
Bophuthatswana National Commercial Corp Ltd v C & E CommrsVAT[1993] BVC 194
British Airways plc v C & E Commrs VAT(1990) 5 BVC 97
British Railways Board v C & E Commrs VAT(1977) 1 BVC 116
C & E Commrs v Leightons Ltd VAT[1995] BVC 192
C & E Commrs v Pilgrims Language Courses Ltd VAT[1999] BVC 328
C & E Commrs v Scott VAT(1977) 1 BVC 139
C & E Commrs v Wellington Private Hospital Ltd VAT[1997] BVC 251
Card Protection Plan Ltd v C & E Commrs VATVAT(Case C-349/96) [1999] BVC 155; [1994] BVC 20 (CA)
EC Commission v UK VAT(Case 353/85) (1988) 3 BVC 265
Rayner & Keeler Ltd v C & E Commrs VAT[1994] BVC 194
United Biscuits (UK) Ltd (t/a Simmers) v C & E CommrsVAT[1992] BVC 54
Virgin Atlantic Airways Ltd v C & E Commrs VAT[1995] BVC 93
Supply - Zero-rating - Drugs and appliances personally administered to a patient - Whether single composite supply or separate supplies of goods and services - If separate, whether drugs and appliances zero-rated as qualifying goods supplied in accordance with requirement under reg. 20, National Health Service (Pharmaceutical Services) Regulations 1992 (SI 1992/662) -Value Added Tax Act 1994 schedule 8 group 12Value Added Tax Act 1994, Sch. 8, Grp. 12, item 1A(a) and Value Added Tax Act 1994 schedule 9 group 7Sch. 9, Grp. 7, item 1(a).
The issue was whether drugs personally administered by a doctor to a patient under reg. 19(b) of the National Health Service (Pharmaceutical Services) Regulations 1992 (SI 1992/662) were zero-rated by item 1A(a) of Value Added Tax Act 1994 schedule 8 group 12Grp. 12 of Sch. 8 to the Value Added Tax Act 1994 as drugs provided by a doctor under reg. 20 on account of difficulty in obtaining them from a pharmacy.
The appellants were partners in a general practice, dispensing drugs and appliances to 51 per cent of its total practice population. The practice had been treating all personally administered items as exempt for VAT purposes and by letter dated 16 January 1997 they wrote to Customs requesting guidance on the subject of personally administered items for dispensing patients. On 24 September 1997, Customs ruled that drugs and medical items personally administered by a doctor working in the National Health Service formed part of a single exempt supply of the doctor's medical services. The partners appealed. Prescribed drugs supplied by a pharmaceutical chemist to an individual are zero-rated under item 1, Value Added Tax Act 1994 schedule 8 group 12Grp. 12, Sch. 8 to the 1994 Act. In cases where such drugs had to be supplied by a doctor, reg. 19 and 20 of the National Health Service (Pharmaceutical Services) Regulations 1992 provided:
Provision of pharmaceutical services for immediate treatment or personal administration-
A doctor:
(a) shall provide to a patient any appliance or drug, not being a scheduled drug, where such provision is needed for the immediate treatment of that patient before a provision can otherwise be obtained; and
(b) may provide to a patient any appliance or drug, not being a scheduled drug, which he personally administers or applies to that patient.
Arrangements for provision of pharmaceutical services by doctors-
(1) Where a patient:
(a) satisfies an FHSA that he would have serious difficulty in obtaining any necessary drugs or appliances from a pharmacy by reason of distance or inadequacy of means of communication; or
(b) is resident in a controlled locality, at a distance of more than one mile from any pharmacy, and one of the conditions specified in para. (2) is satisfied in his case,
he may at any time request in writing the doctor on whose list he is included to provide him with pharmaceutical services.
The appellant contended that where a doctor provided drugs under the provisions of reg. 19 to a patient who was registered with him under the provisions of reg. 20 those drugs constituted a separate supply from that of the services and were zero-rated. This was because where a doctor supplied a drug to a reg. 20 patient it was done under the provisions of reg. 20, even when the drug was administered by the doctor. Alternatively, where the personal administration of the drug was under reg. 19 the doctor was nonetheless also authorised so to do by reg. 20. The policy behind reg. 20 was to encourage the provision of pharmaceutical services to patients who would otherwise have difficulty in obtaining the services. Customs' approach would undermine such a policy, since it forced the doctor to ask his patient to obtain the drug from a pharmacist, who could reclaim the VAT, and bring it back to him for administration. There had to be a level playing field in the VAT treatment between pharmacists and doctors who dispensed to reg. 20 patients. All drugs and appliances supplied by a pharmacist were zero-rated and it should be the same with doctors. It was accepted that, were the tribunal to be against the appellants on the reg. 19 and 20 issue and to find that there was a separate supply of drugs, the latter would be standard-rated.
The commissioners contended that reg. 19 and 20 were quite separate, reg. 19 being concerned with the provision of drugs as part of the treatment by the doctor of a patient and reg. 20 dealing with the provision of pharmaceutical services unaccompanied by any medical care or treatment. Drugs supplied under reg. 19 were not zero-rated because they were part of an overall exempt supply and therefore did not attract zero-rating under item 1A of Value Added Tax Act 1994 schedule 8 group 12Grp. 12 of Sch. 8. Regulation 20 only applied where a patient had difficulty in gaining access to a pharmacist. By contrast, the service supplied under reg. 19 was that of the drugs and if they were taken away no medical service would be left, so that the administration of drugs was integral to the overall supply. It could not be said that drugs or appliances supplied under reg. 20 were a supply of services made by the doctor. To find for the appellants would cause enormous administrative difficulties, since it would be to decide that there were two separate supplies. The issue of fairness raised by the appellants did not apply in this case. The appellants did not differ from other taxpayers in making exempt supplies.
Held, allowing the taxpayers' appeal;
1. When treating a patient under reg. 19, a doctor made two separate supplies, one of goods and one of services. Customs' argument that the service provided was inseparable from the supply of goods and that the treatment dominated the supply was not accepted. This was illustrated by the fact that where a diabetic patient was in an insulin coma a nurse could as well administer the necessary injection as could the doctor.
2. The tribunal accepted the appellants' submission that the policy behind Value Added Tax Act 1994 schedule 8 group 12Grp. 12, item 1A was to provide a level playing field in treatment between pharmacists and doctors who dispensed to reg. 20 patients. It would be artificial to distinguish between drugs administered to a patient under reg. 20, which were not personally administered by a doctor, and those administered by him in a situation of emergency and which would come from the same stock.
3. The fact that if there were two separate supplies enormous administrative difficulties would follow should not be allowed to determine the issue. In any event, a doctor would be keeping a supply of drugs on hand for reg. 20 patients and the fact that the doctor himself administered them to the patient ought not to present difficulties in administration.
4. Where a doctor administered drugs or other treatment to a reg. 20 patient he was doing so under the provisions of reg. 19 and 20, and they were zero-rated.
[The tribunal set out the facts summarised above and continued as follows.]
It was the appellants' case that where a doctor supplied pharmaceutical services under the provisions of reg. 19 [of theNational Health Service (Pharmaceutical Services) Regulations1992 (SI 1992/662)] to a patient who was registered with him under the provisions of reg. 20, the drugs or appliances provided by the doctor constituted a separate supply from the provision of. the services of the doctor and were zero-rated for value added tax by virtue of item 1A ofValue Added Tax Act 1994 schedule 8 group 12Grp. 12 of Sch. 8 to the Value Added Tax Act 1994.
It was submitted that where a doctor supplied a drug or appliance to a reg. 20 patient, this was done under the provisions of reg. 20, even where the drug or appliance was administered by the doctor. Regulation 20 gave the doctor specific authorisation for the administration of the drug or appliance, there was therefore no need for further authorisation under reg. 19.
Regulation 19 was a fall-back provision upon which a doctor...
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