E-Zec Medical Transport Services Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 25 August 2022 |
| Neutral Citation | [2022] UKFTT 302 (TC) |
| Court | First-tier Tribunal (Tax Chamber) |
[2022] UKFTT 302 (TC)
Judge Guy Brannan
First-Tier Tribunal (Tax Chamber)
Value added tax – Non-emergency ambulance services – Whether zero rated under VATA 1994, Sch. 8, Grp. 8, Item 4 – R & C Commrs v Jigsaw Medical Services Ltd [2018] BVC 517 considered
In E-Zec Medical Transport Services Ltd [2022] TC 08574, the FTT found that non-emergency transport of patients to and from hospital in vehicles which could not carry ten or more passengers due to adaptations for wheelchairs was zero rated under VATA 1994, Sch. 8, Grp. 8, Item 4.
The appellant provided non-emergency passenger transport services (NEPTS); this primarily comprised the transport of patients to and from hospital appointments. Its main customer was the NHS. Many patients had mobility issues and the vehicles used by the appellant were adapted to carry wheelchairs and stretchers. In addition to adaptations needed to secure a wheelchair so that a patient could travel in their chair, the vehicles had a wheelchair cage to secure folding wheelchairs. Some patients transferred from a folding wheelchair to sit in a standard seat, they might have ongoing mobility issues or temporary mobility issues brought on by their treatment, e.g. a cancer patient receiving chemotherapy might need to use a wheelchair after their hospital appointment.
The vehicles used to provide NEPTS were all customised by the appellant. The majority of its vehicles were base panel vans in which a specialist contractor fitted a flooring system to secure the wheelchairs, a ramp, a winch and a wheelchair cage. The usual configuration for the adapted vehicle enabled it to carry eight seats and two wheelchairs. However, because of the weight of the flooring system, the maximum carrying capacity of the vehicles was eight persons.
If purchased from the manufacturer with the standard seating configuration, the vehicles would have been able to carry 12–14 persons. The appellant was not disputing the VAT treatment of transport in vehicles where the standard seating configuration was less than ten.
The question before the FTT was whether or not the NEPTS supplied in the ‘disputed vehicles’ was zero rated under VATA 1994, Sch. 8, Grp. 8, Item 4. Item 4(a) states that zero rating applies to ‘the transport of passengers in any vehicle designed or adapted to carry not less than 10 passengers’.
Item 4(a) is qualified by Note 4D which states that Item 4(a) includes transport in a vehicle:
- which is designed, or substantially and permanently adapted, for the safe carriage of a person in a wheelchair or two or more such persons, and
- which, if it were not so designed or adapted, would be capable of carrying no less than 10 persons.
The appellant argued that the flooring was an adaptation for the safe carriage of wheelchairs and, if it were not for the weight of this and the other adaptations, the vehicles were capable of carrying ten people. HMRC’s counter arguments are addressed below. But, in summary, the FTT accepted the evidence that if the adaptations were removed, the vehicle could accommodate ten passengers within the legal weight limit (para. 92).
The FTT allowed the appellant’s appeal on this basis concluding that the NEPTS were zero rated (para. 93).
HMRC argued that the vehicles had a maximum carrying capacity of eight persons and the wheelchair adaptations only served to reduce this figure because if a wheelchair was carried, some of the eight seats needed to be folded away. HMRC used eight persons as the basic carrying capacity because this was the passenger accommodation installed in the base panel vans purchased by the appellant, i.e. had the appellant purchased a 12-seater van and then removed seats to accommodate wheelchairs, HMRC would have accepted that it was designed or adapted to carry ten or more passengers. The FTT specifically rejected the proposition that in order to fall within Note 4D it was necessary to remove seats from a vehicle (para. 72).
The FTT referred to R & C Commrs v Jigsaw Medical Services Ltd [2018] BVC 517 and concluded that ‘the test is whether, if the wheelchair modifications had not been made, the vehicle would be capable of carrying at least 10 persons, but taking account only of (and not going beyond) the wheelchair modifications that had been undertaken’. Other arguments were presented but the crux of the case was whether or not the flooring was a wheelchair modification. HMRC argued that it was not a wheelchair modification because its ‘sole or predominant purpose’ was not the carriage of wheelchairs, it was also used to secure the seats and allowed them to be moved backwards and forwards (para. 86).
The FTT noted that Note 4D does not require adaptations to be solely or predominantly for a particular purpose, it merely refers to adaptation for the ‘safe carriage’ of wheelchairs. It further noted that the evidence from the appellant was that the flexible system used in the vans, which could be used to secure seats as well as wheelchairs, was safer than fixings such as ring bolts whose sole function was for the securing of wheelchairs. The FTT remarked that ‘it would seem strange if one of the statutory purposes (“safe carriage”) was thwarted by reading the words “solely or predominantly” into the legislation, denying zero rating, at least in part, because a safer system of securing wheelchairs was used’ and concluded ‘I see no reason to give the statutory wording the highly restrictive meaning for which HMRC contend’ (para. 88)
The ambulance services supplied by E-Zec are exempt under VATA 1994, Sch. 9, Grp. 7, Item 11. However, zero-rating takes precedence over exemption and is obviously beneficial as it brings with it entitlement to recover input tax. This case will be of interest to all providers of transport services where zero-rating is dependent upon meeting the ‘10 passenger test’, not least other providers of non-emergency ambulance services. As the arguments put before the FTT were highly specific to the particular facts of this case, it is recommended that, before applying the decision to their own circumstances, providers read the decision in full.
Comment by Sarah Kay, Senior Tax Writer at Croner-i.
Melanie Hall QC and Stuart Walsh instructed by Pinsent Masons LLP appeared for the appellant
Joanna Vicary, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs appeared for the respondents
[1] E-zec Medical Services Limited (“the Appellant”) appeals against decisions made by HMRC to the effect that its provision of non-emergency ambulance services (“the ambulance services”) is not zero rated under Item 11 Group 7 Schedule 9 of the Value Added Tax Act 1993 (“VATA”). The Appellant contends that its ambulance services are properly zero rated. The appeal principally concerns the proper construction and application of Note 4D to Item 4(a) Group 8 Schedule 8 VATA which, for convenience, I shall refer to respectively as “Note 4D” and “Item 4(a)” hereafter.
[2] It is common ground that the ambulance services in question are exempt from VAT under Item 11 Group 7 Schedule 9 VATA. The dispute, as I have indicated, solely concerns the question whether the ambulance services are zero rated because, if so, the Appellant will be able to recover its input tax attributable to the ambulance services whereas it cannot do so if those services are merely exempt. The parties agreed that if the ambulance services are zero rated the zero rating takes precedence over exemption under section 30(1) VATA.
[3] I was provided with an electronic bundle of documents running to some 3,500 pages. On behalf of the Appellant, Mr Steve Shaw, formerly the managing director of Cartwright Vehicle Conversions Ltd (“Cartwright”), and Mr Andrew Wickenden, formerly the managing director of the Appellant, produced witness statements and were cross-examined. Mr Wickenden's evidence included a number of videos showing the various configurations of non-emergency ambulances used by the Appellant. These videos were shown during the hearing, particularly during Mr Wickenden's cross-examination.
[4] I found both Mr Shaw and Mr Wickenden to be reliable and credible witnesses.
[5] Article 132(1)(p) of the Principal VAT Directive (“the PVD”) provides that Member States shall exempt the following:
The supply of transport services for sick or injured persons in vehicles specially designed for the purpose, by duly authorised bodies
[6] Article 131 of the PVD provides as follows:
The exemptions provided for in Chapters 2 to 9 shall apply without prejudice to other Community provisions and in accordance with conditions which Member States shall lay down for the purposes of ensuring the correct and straightforward application of those exemptions and of preventing any possible evasion, avoidance or abuse
[7] As regards UK domestic legislation, section 31(1) VATA provides:
A supply of goods or services is an exempt supply if it is a description for the time being specified in Schedule 9.
[8] Item 11, Group 7, Schedule 9 VATA “health and welfare” (“Item 11”) exempts:
The supply of transport services for sick or injured persons in vehicles specially designed for that purpose
[9] In relation to zero rating, section 30(1) provides:
Where a taxable person supplies goods or services and the supply is zero-rated, then, whether or not VAT would be chargeable on the supply apart from this section–
- no VAT shall be charged on the supply; but
- it shall in all other respects be treated as a taxable supply;
and accordingly the rate at which VAT is treated as charged on the supply shall be nil.
[10] Section 30(2) VATA provides:
A supply of goods or services is zero-rated by virtue of this subsection if the goods or services are of a description for the time being specified in Schedule 8 or the...
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