The Court of Appeal (CoA) has upheld the decision of both lower tax tribunals by finding that the provision of medial staff to an employment agency were taxable supplies of staff and not supplies of exempt medical services.

The CoA found that the taxpayer had no real control of the medical practitioners, that the medical practitioners operated under a general framework of control of the NHS Trust to whom the staff were supplied to via an intermediary.  The CoA also noted that the company did not carry professional indemnity insurance for the services provided by the practitioners on their books and that the agreement they had entered into with an intermediary detailed that the practitioners would abide by the directions of the end client.  Similar to the lower tribunals the CoA rejected the argument that being highly skilled professionals meant the taxpayer controlled their clinical decision making.

Despite the taxpayer’s references to European cases on the exemption for medical services the CoA found that no medical services were provided by the taxpayer company and that it had only provided staff.

This is a difficult decision for the company as it is expected that the cost of its staff to the intermediate agency will be 20% more expensive than the intermediate directly obtaining staff themselves.  It was uncertain whether this intermediary was able to recover VAT despite the fact that NHS Trusts can generally recoup VAT.

The decision can be found at: Mainpay Limited v The Commissioners for His Majesty’s Revenue and Customs – Find case law (nationalarchives.gov.uk)

Please contact us if you have any questions on VAT or make outside of the scope, exempt or taxable supplies.  We can help with compliance and planning.  Errors with VAT can be costly.