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Andrew Needham, Director of VAT Solutions (UK) Ltd, continues his report on a selection of recent VAT cases.

Andrew Needham

Tribunal say adminstering of drugs to patients in own homes is a zero-rated supply

This case considered the VAT liability of the Appellant’s supplies, which comprise the administration by nurses of drugs prescribed for patients, to those patients in their own home.  The Appellant said it made zero-rated supplies of goods, and as such, could reclaim all of its input tax. HMRC, however, argued that it actually made exempt supplies of care.

The Tribunal differentiated the case from that of Dr. Beynon & Partners in so much as the principal supply was that of the drugs, with the administration by a nurse being incidental, (in the Dr. Beynon case, the reverse was true).

The Tribunal concluded that in all those cases in which a nurse attends a patient's home to administer a drug supplied by the company, the supply is of zero-rated goods. Although the patient cannot receive the drug without the nurse, it's more important to note that if the drug had not been prescribed for that patient, the company would make no supply at all. Therefore, it is the patient's need for the prescribed drug which determines the essential characteristics of the supply. What is supplied in these circumstances is not so much medical care, but the demonstration to the patient of the correct method of using the goods which have been supplied to him.  The appeal was duly allowed.

Healthcare at Home Ltd (VTD 20,379)

Tribunal says sale of opted development land was a transfer of a going concern (TOGC)

This case concerned the Appellant‘s sale of an opted freehold site near Dartford Bridge.

A development agreement was in place with a third party, and agreements for lease to a supermarket (Sainsbury’s) were in place but, at the time of sale, little actual development work had taken place on the plots beyond preparatory works. The sale agreement stated that the parties understood the transaction to be a TOGC, but HMRC sought to deny TOGC treatment with an argument that the 'same kind of business test' was not satisfied. 

HMRC contended that the Appellant always intended to sell the plots and never intended to hold the plots and receive rent, whilst the purchaser intended to hold the plots and receive rent from them. The Tribunal rejected this contention, finding that the Appellant did, prior to the sale, have an intention to hold the plots and receive rent, thus the same kind of business test was satisfied. This decided the case in the Appellant's favour, but para 10 of the decision is worth a read in that the Chairman suggests that, even if there had been a prior intention to sell the plots before completion of the buildings, TOGC treatment would still have applied.

On a wider point, the Chairman then went on to heavily criticise HMRC at paras 14 and 15, where, amongst other things, he accused the author of the HMRC Statement of Case, of having ‘no idea what an agreement for lease was'. Ouch!  Needless to say, the appeal was thus allowed.

Dartford Borough Council (VTD 20,423)

Tribunal says remedial work done on DIY building after its completion can be zero-rated

The Appellants built a house using the DIY Builders Scheme, and were able to zero-rate the construction. The plastering of the house was subcontracted to a builder, but was then found to be defective, and had to be repaired.

A Certificate of Completion had been issued prior to the reparatory work being started, but the Appellants saw the supply as zero-rated.  HMRC considered the work to be an alteration of an existing house rather than construction of a new house, and assessed the Appellants on the basis that it was standard rated.

The Tribunal reviewed the evidence and concluded that the original plasterwork was inadequate and dangerous, and that the new plasterwork was supplied in the course of the construction of the building. It was, therefore, eligible for zero-rating.  Appeal allowed.

Mr & Mrs James (VTD 20,426)