DECISION
Introduction
1.
Dr Nigel Stanley appeals against an assessment made under s 80(4A) and s
78A of the Value Added Tax Act 1994 (“VATA”) on 9 February 2011 to recover VAT
of £15,713 together with statutory interest of £439.33 that had been repaid to
him in relation to the VAT accounting periods ended 31 August 2007 to 31 August
2009.
2.
Dr David Tallent also appeals an assessment made under s 80(4A) and s
78A VATA to recover VAT and statutory interest. In his case the amount of VAT
that HMRC seek to recover, by an assessment dated 14 February 2011, is £22,567
together with statutory interest of £490.09. This relates to VAT that had been
repaid to Dr Tallent in respect of the accounting periods ended 31 October 2007
to 31 January 2010.
3.
Both appeals concern the correct VAT treatment for medical examinations
of applicants for Australian visas by doctors, appointed to a panel for this
purpose by the Australian Government, and the supply of reports of the findings
of the medical examinations by the panel doctors directly to the Australian
Government’s Department of Immigration and Multicultural Affairs (“DIMA”).
Although Dr Stanley and Dr Tallent were appointed as United Kingdom panel
doctors by the Australian and the New Zealand Governments, and Dr Stanley was
also appointed as a panel radiographer by both Governments, it is the only the
medical examinations undertaken and reports made in relation to the Australian
visas with which these appeals are concerned.
4.
In accordance with directions agreed by the parties, which were endorsed
by the Tribunal (Judge Mosedale) on 19 December 2011, we heard these appeals
together. Dr Stanley and Dr Tallent appeared before us in person with HMRC being
represented by Mr Edward Brown of counsel. In addition to their oral
submissions we had the benefit of clear and helpful written submissions provided
by the parties. These were most appreciated.
Facts
5.
Having heard from Dr Stanley and Dr Tallent and read the documents
provided by the parties it was apparent that the facts which led to the issue
of the assessments were not disputed.
Background
6.
A potential immigrant to Australia (an “applicant”) may be requested by
DIMA to undergo a medical examination as part of his or her application for an
Australian visa. If so, he or she is provided with a Form 26, “Medical
examination for an Australian visa” (the “Form”) which is be completed partly
by the applicant and partly by the doctor who carries out the examination.
7.
In order to make an appointment for a medical examination, as instructed
on the Form, it is necessary for an applicant to contact his or her “closest panel
doctor” and “must attend the same doctor during the course of [the] health
assessment”.
8.
The Form also, states that the applicant is responsible for the costs of
the medical examination and that once completed and given to the doctor, who is
required to send the form directly to DIMA, “the Commonwealth of Australia
becomes the owner of the personal information on the form”.
9.
Parts A and B of the Form, which an applicant is required to complete before
attending the medical examination, contain questions about his or her personal
details and medical history. Part C of the form, the “Applicant’s declaration”,
is to be completed and signed by an applicant “in the presence of the examining
doctor” after Parts A and B have been completed. It contains the following
declaration:
I understand that the Commonwealth of Australia
becomes the owner of the information on this form and that the doctor is
required to send the form to the department.
Before completing Part D of the form, providing details
of the physical examination, the examining doctor must first ensure that the applicant
has provided the information required in Parts A and B before completing and
signing the declaration in Part C. The doctor is instructed not to give the Form
and report to the applicant (although a copies can be provided) but send these directly
to DIMA.
10.
Dr Tallent describes the information supplied to DIMA in the medical
report as comprising of the findings of the clinical examination of a visa
applicant and a professionally taken medical history (as opposed to a history
obtained passively by means of a questionnaire). This requires the professional
judgement of an experienced physician who, during the course of the
examination, determines the significance or otherwise of aspects of an
applicant’s details and whether further detailed elucidation or further reports
(eg from a GP or Specialist) are required.
11.
The role and obligations of a panel doctor are set out in the
“Instructions for medical and radiological examination of Australian visa
applicants” (the “Instructions”) published by the Australian Government.
12.
It is clear from paragraph 1.1 of the Instructions that the Australian
Health Operations Centre (“HOC”) processes offshore medical results, assists
panel members and is where medical results are referred when a review by a
Medical Officer of the Commonwealth of Australia (“MOC”) is required. MOCs
determine whether applicants meet the health criteria based on reports by panel
doctors, panel radiologists and specialists.
13.
Paragraph 5 of the Instructions explains that panel members include
panel doctors who undertake medical examinations, and panel radiologists who
undertake radiological examinations and that the Australian Government appoints
individuals not medical clinics as panel doctors.
14.
The “Conditions of appointment” which are set out at paragraph 6 of the
Instructions state as follows:
Panel members are not employees of the Australian
Government. They do not represent the Australian Government and no contractual
arrangement exists. Panel doctors are required to comply with all conditions of
appointment issued to them by the Australian Government, including those
expressed in these instructions. These instructions may be reissued or amended
periodically and panel members will be advised when this occurs.
Visa applicants attend the panel doctor of their
choice. The Australian Government cannot accept any responsibility for any loss
of business or patronage at a clinic, whether as a result of changes to the
migration program, applicants’ choices, suspension or removal from the panel,
or any other reason. Panel members are not to receive or accept service or
incentive fees of any kind from third parties, such as migration agents or
referral agencies.
15.
To avoid any conflict of interest or the perception of such a conflict because
“panel members provide a service on behalf of the Australian Government”, paragraph
6.3 of the Instructions provides, inter alia, that a panel doctor “should not
be an applicant’s treating doctor.” However, a panel doctor is required, under
paragraph 13 of the Instructions, to advise an applicant of any abnormal
findings or inform him or his usual doctor if found to be seriously ill and in
need of urgent treatment which is in accordance with the general “duty of care”
owed by a doctor to those he examines.
16.
It is clear from paragraph 9 of the Instructions that the medical
examination “should be thorough and complete, based on taking a history,
examining the applicant and completing the form.” The HOC anticipates that the
physical examination of “young healthy individuals with no significant medical
history to take at least 15 minutes” and for an “elderly person, or someone
with a complex medical history, the examination is likely to take 30-60
minutes.” If an abnormality is detected or declared paragraph 15 of the
Instructions require a panel doctor to provide “sufficient detail of the
nature, severity and possible prognosis of the medical condition” so that DIMA
is able to “clearly appreciate the applicant’s state of health and relevant
significance of the condition.”
17.
Paragraph 10 of the Instructions, “Setting fees for Australian
immigration health examinations”, states that:
Panel members outside Australia are not contracted
to, or paid by, the Australian Government for providing immigration health
examinations. Panel members are to charge visa applicants directly for
examinations undertaken, and it is the responsibility of the applicant to pay
the fee.
The Australian Government does not prescribe a fee
structure and considers that panel members must be remunerated appropriately.
Fees should be consistent with local fees and charges for similar services. Fee
structures well above or below local market rates are not acceptable and will
be investigated by HOC.
Applicants should be advised of standard examination
fees in advance, including mailing/courier costs. Fee schedules should be
displayed in the reception area and/or provided to applicants for review prior
to their appointment. Standard fees and courier charges should be paid prior to
the examination. Fully itemised receipts must be issued for each appointment
listing separate charges for an examination, blood test(s), and referral(s) and
mailing courier costs.
18.
Following the medical examination and completion of the Form paragraphs
15 and 16 of the Instructions directs as follows:
[15] Recommendations
When an abnormality is detected or declared panel
members must provide sufficient detail on the nature, severity and possible
prognosis of the medical condition, so that the MOC is able to clearly
appreciate the applicant’s state of health and the relative significance of the
medical condition. Comment on how each medical condition affects, or is likely
to affect, the applicant’s normal daily functioning, level of independence and
fitness for work. At the completion of the examination, panel doctors are asked
to provide and ‘A’ or ‘B’ grading. …
[16] Where to send completed forms
Panel members must never give the original forms,
films, reports or specimens back to an applicant or their representative during
the health examination(s) to send to [DIMA].
When an applicant completes the form and gives it to
a panel clinic, the information becomes the property of the Commonwealth of
Australia. The original forms 23/160, test results and x-ray films must be sent
directly to the processing centre from the processing clinic.
Upon request panel members can provide an applicant
with copies of any forms, diagnostic reports or test results without permission
from [DIMA].
19.
In the event of an incomplete health examination a panel doctor is
required, by paragraph 17 of the Instructions, to complete the Form to cover
what has been completed to date, state the reason for not completing the
medical examination and return the form to DIMA “if the completed medical would
have been sent to HOC and courier fees have been paid by the applicant. By
ensuring applicants pay courier costs up-front, panel members avoid courier
costs for incomplete medicals.”
20.
Although the work undertaken by such panel doctors was originally treated
as an exempt supply (under Group 7 Schedule 9 VATA) following the decision of
the European Court of Justice (“ECJ”), in Peter D’Ambrumenil and Dispute
Resolution Services Limited v Commissioners of Custom and Excise [2003]
EUECJ c-307/01, it was recognised that the medical examinations and reports to
enable DIMA to decide whether to grant a visa to an applicant were subject to
VAT as standard rated supplies.
Dr Nigel Stanley
21.
Dr Stanley registered for VAT on 1 May 2007 and charged VAT on fees for
undertaking medical examinations as a panel doctor. This work accounted for
some 80% of his practice.
22.
On 25 June 2007 he received an email from the Australian High Commission
which stated that the work undertaken by panel doctors was an exempt supply for
VAT purposes. Attached to that email was a letter, dated 22 May 2007, from HMRC
that had been sent to a panel doctor, whose details had been redacted, which
stated:
Provided the supplies will be used by the
governments concerned [Australian and New Zealand], which appear to be the
situation, then the supplies will be covered by paragraph 3 of schedule 5
[VATA] and therefore take place in the relevant countries concerned. As these
countries are outside the European Community, no VAT should be charged.
23.
Following receipt of this information Dr Stanley sought advice from his
accountant who on 10 July 2007 wrote to HMRC seeking confirmation that as Dr
Stanley reported to the immigration authorities in the relevant countries his
services were outside the scope of United Kingdom VAT. The reply, dated 17
July, from HMRC stated that although the Australian and New Zealand immigration
authorities were the recipients of the information the applicant was the
“customer” and therefore the standard rate of VAT was applicable.
24.
However, over the next two years Dr Stanley became aware that not all
panel doctors were charging VAT and was advised by solicitors, Dickenson Dees
LLP, that VAT was not applicable on the services he supplied. On 11 September
2009 Dickenson Dees submitted a voluntary disclosure to HMRC on behalf of Dr
Stanley to reclaim VAT of £22,957 comprising of £15,733 VAT charged to
applicants for Australian visas with the balance for applicants for visas for New Zealand.
25.
On 28 January 2010, having considered the voluntary disclosure, HMRC
replied to Dickenson Dees concluding that the supplies in respect of potential
immigrants to Australia were outside the scope of VAT as these were supplied to
the Australian Government in Australia but that as the supplies were made to
potential immigrants to New Zealand in the United Kingdom these were properly
subject to VAT. Accordingly Dr Stanley received a refund of £15,733 on 23 March
2010 in respect of the VAT paid by applicants for medical examinations in
connection with Australian visas. He received a further payment on 31 March
2010 of £439.33 which was statutory interest “for departmental delay.”
26.
On 26 January 2011 HMRC, after having taken further policy and legal
advice, wrote to Dr Stanley’s solicitors advising that it was now considered
that they had made an error in accepting the voluntary disclosures in relation
to the medical examinations and reports undertaken for Australian visas which they
now considered should have been treated as having been supplied to the
applicants in the United Kingdom and subject to VAT as was the case with the
New Zealand applicants.
27.
On 9 February 2011 HMRC issued an assessment to recover the repayment
which had been made to Dr Stanley. The assessment was upheld following a review
and on 7 April 2011 Dr Stanley appealed to the Tribunal.
Dr David Tallent
28.
Dr Tallent registered for VAT with effect from 1 August 2007. Like Dr
Stanley, through information circulated to all panel doctors, Dr Tallent was made
aware of HMRC’s letter of 22 May 2007 which indicated that the services
supplied by panel doctors were outside the scope of VAT (see paragraph 22,
above). However, as the letter had not been specifically addressed to him, Dr
Tallent sought advice from HMRC and was informed that the letter was incorrect
and VAT should be charged to applicants for medical examinations and reports
sent to DIMA.
29.
In 2009 Dr Tallent was contacted by Dickenson Dees LLP who assured him
that agreement had been reached with HMRC that both Australian and New Zealand
medical examinations were outside the scope of VAT and that their doctor
clients were no longer charging VAT for these services. In view of this advice
Dr Tallent contacted HMRC and, following email correspondence, was advised on
13 November 2009, in an email from Hugh Haward, a Tax Policy Advisor with HMRC
that:
From a VAT perspective, the Australian Government is
receiving the supply of the medical report, and not the private individual. For
place of supply purposes the supply of the medical report is a VATA 1994
Schedule 5 paragraph 3 supply and will be supplied where the customer belongs
and is outside the scope of VAT.
It was noted that applications for New Zealand visas were supplied to the individual applicant and therefore were standard
rated for VAT purposes.
30.
By this time the individual solicitors from Dickenson Dees who had
contacted Dr Tallent had moved from that firm to McGrigors solicitors. Following
the advice from HMRC, Dr Tallent instructed McGrigors in respect of the VAT liability
on the medical examinations for applicants for New Zealand immigration visas.
31.
On 30 April 2010 McGrigors submitted, on behalf of Dr Tallent, a
voluntary disclosure in the sum of £36,342.02 of which £22,567 related to the
VAT charged on the provision of medical examinations and reports in relation to
applicants for Australian visas with the balance being VAT charged to applicants
for New Zealand visas. Although HMRC rejected the claim so far as the New Zealand visa applicants were concerned a repayment was made to Dr Tallent in respect of
the Australian visa medical examinations on 14 July 2010 and a further payment
of statutory interests of £490.09 was made to him on 28 October 2010.
32.
However, on 25 January 2011, having revisited the decision and received
advice from their Policy/Solicitors Office, HMRC wrote to Dr Tallent to advise
that the VAT treatment of these supplies was believed to be “in error” asking
for a repayment of the £22,567 and £490.09 statutory interest.
33.
On 14 February 2011 an assessment was by HMRC to recover these amounts.
Dr Tallent appealed against this assessment to the Tribunal on 21 February
2011.
Discussion
Issues
34.
The following issues arise as a result of the recovery assessments:
(1)
whether the services provided by Dr Stanley and Dr Tennant were supplied
in the United Kingdom;
(2)
whether the applicant or DIMA was the recipient of supply; and
(3)
whether, irrespective of the correct legal treatment it is possible
there was a legitimate expectation that HMRC should be bound by its written
advice, in particular its guidance in Notice 741.
Place of supply
35.
The place in which a supply of services takes place is relevant to these
appeals as s 1(1) VATA which provides that VAT shall be charged on “the supply
of goods and services in the United Kingdom.” At the relevant time the place of
supply was governed by s 7(10) VATA. This provided that:
A supply of services shall be treated as made–
(a) in the United Kingdom if the supplier belongs in
the United Kingdom; and
(b) in another country (and not the United Kingdom) if the supplier belongs in that other country.
36.
However, paragraph 16 of the Value Added Tax (Place of Supply of
Services) Order 1992, made under s 7(11) VATA provided that:
Where a supply consists of any services of a
description specified in any of paragraphs 1 to 8 of Schedule 5 to [VATA] and
the recipient of that supply–
(a) belongs in a country, other than the Isle of Man, which is not a member state; …
it shall be treated as made where the recipient
belongs.
37.
Paragraph 3 of schedule 5 VATA is relevant to these appeals. It
specifies:
Services of consultants, engineers, consultancy
bureaux, lawyers, accountants and other similar services; data processing and
provision of information (but excluding from this head any services relating to
land).
This implements, in identical terms, Article 56(1)(c) of
Directive 2006/112/EC (the Principal VAT Directive) which itself is in
identical terms to the third indent of Article 9(2)(e) of Directive 77/388/EEC
(the Sixth Directive).
38.
As Proudman J said in American Express Services Europe Ltd v HMRC
[2010] STC 1023 (“American Express”) at [74]:
“The ECJ has provided guidance on the
application of the third indent [of the Sixth Directive]. In von Hoffmann v.
Finanzant Trier [1997] STC 1321 it was said that the professions there
mentioned were used as a means of defining the categories of services to which
it refers. It is the services which are relevant, not the label applied to the
professionals.”
She continued:
[75] “The right approach (see von
Hoffmann at paragraphs 16 and 20-21) is to ask whether the services under
consideration,
"fall within the category of those principally
and habitually carried out as part of the professions listed…"
[76] The services listed are disparate
activities and the only common feature of the first five is that they all come
under the heading of "the liberal professions": see Maatschaap MJM
Linthorst v. Inspecteur der Belastingdienst [1997] STC 1287. However the
third indent was not intended to cover the activities of all liberal
professions, or to cover "all activities carried on in an independent
manner": see Linthorst at paragraph 20. Thus the services of
veterinary surgeons and arbitrators do not fall within the third indent, even
as "similar services". Nor do the services of estate agents and
architects, who are expressly mentioned in Art 9(2)(a).
[77] Although the words "and
similar services" in the third indent broadens the scope of the included
services, that scope is limited. In von Hoffmann [[1997] STC 1321] (at
paragraphs 20-21) the ECJ said,
"…the expression 'other similar services' does
not refer to some common feature of the disparate activities mentioned in art
9(2)(e), third indent, of the Sixth Directive, but to similar services to each
of those activities, viewed separately…
A service must be regarded as similar to those of
one of the activities mentioned… when they both serve the same purpose."
[78] It is not enough that the
services should be of an intellectual nature, drawing on expertise, or have
something in common with the listed categories. It is necessary to have close
regard to the specific provisions of the third indent. I do not accept Mr
Cordara's submission that the third indent should be construed in the widest
possible way as a single gateway of intellectual services from the liberal
professions.
39.
It is clear from the judgment of the ECJ in Maatschap MJM Linthorst,
KGP Pouwels and J Scheres cs v Inspecteur der Belastingdienst/Ondernemingen
Roermond [1997] (“Linthorst”) at [21] that paragraph 3 of schedule 5
VATA does not include services provided by the medical profession generally. As
such, despite its use in the United Kingdom for suitably qualified medical
professionals, the use of the term “consultants” in the paragraph cannot be a
reference to medical consultants.
40.
It is therefore necessary to consider whether the provision of medical
examinations and reports by Dr Stanley and Dr Tallent fall within the category
of those principally and habitually carried out as part of the professions
listed in paragraph 3 of schedule 5 VATA.
41.
Dr Stanley and Dr Tallent contend that the services they provide are
those of “consultants” or “other similar services” or the “provision of
information” which fall within paragraph 3 of schedule 5 VATA making it necessary
to ascertain the recipient of that supply in order to determine the liability
to VAT. However, Mr Brown, for HMRC, submits that the basic rule, as set out in
s 7 VATA, applies and, as Dr Stanley and Dr Tallent “belong” in the United Kingdom, their services were properly chargeable to VAT.
42.
In Linthorst the ECJ rejected a claim that veterinary services
fell within the services of “consultants” or “other similar services” even
though they did sometimes involve advisory or consultancy aspects as “that fact
is not enough to bring the principal and habitual activities of the profession
of veterinary surgeons within the concepts of ‘consultants’ … or to cause them
to be regarded as ‘similar’” (see Linthorst at [22]). In its judgment in
that case (at [14]) the ECJ set out the principal function of a veterinary
surgeon, which is:
“… to make a scientific assessment of animals'
health, take preventive medical action, effect diagnoses and provide therapeutic
treatment for sick animals.”
We accept Mr Brown’s submission that with the
substitution of “human” for “animal”, this could describe the principal and
habitual functions of a doctor.
43.
Dr Stanley referred us to American Express where at Proudman J said, at [80]:
A consultant gives advice based on a high degree of
expertise. It seems to me that Amex Europe's activities went well beyond the
habitual activity of a consultant (or consultancy bureau) in giving expert
advice to a client. Plainly Amex Europe did provide advice to local business
units. However the description of Amex Europe as 'an intelligent client',
ascertaining and executing the needs of the local business units in accordance
with group policy, was in my judgment properly characterised by the Tribunal as
a management function going much further than consultancy activities.
Consultants give advice, they do not make decisions. The Tribunal was right to
give weight to the fact that Amex Europe either gave approval to lease and
other transactions conducted by local business units or participated in the
approval process when the approval of AETRSCo was also required. These were
executive not consultancy functions. 'Management' is a concept of Community Law
and (as Advocate-General Jacobs said in Customs & Excise Commissioners
v. Zoological Society of London [2002] STC 521 at paragraph 32) is
characterised by the taking of decisions rather than the mere implementation of
policy.
He contrasted his own services for DIMA with those
offered by Amex in American Express emphasising that the decision on
whether to grant an applicant met the health criteria for a visa was not his
but that of the MOCs and that as a panel doctor he only gave advice and
information to the MOCs which was based on a high degree of expertise and he should
therefore be regarded as a consultant.
44.
Dr Tallent’s submissions in relation to paragraph 3 of schedule 5 VATA
relied on HMRC’s guidance contained in Notice 741(2008), ‘Place of supply of services’.
However, while in certain circumstances it may be possible for this to create a
legitimate expectation upon which a taxpayer may be able to rely, such guidance
merely expresses HMRC’s view of the law and not what it is which is to be
derived from the legislation as interpreted by the courts.
45.
Having regard to the nature of the services provided by Dr Stanley and
Dr Tallent, namely the provision of a medical report based on the findings of a
clinical examination and a professionally taken history of an applicant
requiring the professional judgement of an experienced physician and the
“recommendations” required by paragraph 15 of the Instructions (set out at
paragraph 18, above), we are of the view that these are of a type principally
and habitually provided by a doctor not a consultant and cannot be regarded as “similar”
to services provided by a consultant or the provision of information.
46.
As such we consider that they do not fall within paragraph 3 of schedule
5 VATA and therefore, and in accordance with s 7 VATA, find that these services
were provided in the United Kingdom and were properly subject to VAT.
47.
Given our finding on this issue it is unnecessary to go further but as we
have had the benefit of hearing arguments on them it may be helpful if we deal
with the other two issues.
Recipient of supplies
48.
If we had found that the services supplied by Dr Stanley and Dr Tallent
did fall within paragraph 3 of schedule 5 VATA it would be necessary to determine
whether these had been supplied to either a visa applicant or to DIMA.
49.
Dr Stanley contends that as he undertook the medical examinations of
applicants for, and sent the reports to DIMA it, and not the applicant is the
recipient of his services. He points to the declaration on the Form (set out at
paragraph 9, above) which states that “the Commonwealth of Australia becomes
the owner of the information on this form and that the doctor is required to
send the form to the department.”
50.
He also refers to the Instructions which, at paragraph 16 (set out at
paragraph 18, above) prohibits the panel doctors from giving the original Form,
films, reports or specimens to the applicant as these also become the property
of the Commonwealth of Australia. While he accepts that an applicant does have
a choice of doctor this is limited to those on the panel which is appointed by
Australian Government.
51.
Relying on Auto Lease Holland BV v Bundesamt für Finanzen [2003] EUECJ C-185/01 Dr Stanley contends that as the Australian Government take
physical possession of the report (as did the lessee of the car to whom the
fuel was supplied in Auto Lease) DIMA and not the applicant was the
beneficiary and recipient of the supply. He dismisses the contractual
arrangements contending that the statements in paragraph 6 of the Instructions
(set out at paragraph 14, above) merely imply that the panel doctors do not
have an executive role in deciding whether or not an applicant meets the health
requirements of DIMA. He refers to paragraph 6.3 (see paragraph 15, above)
which states that the panel doctors “provide a service on behalf of the
Australian Government” and that an applicant only attends a medical examination
at the request of DIMA.
52.
Dr Tallent also contends that DIMA and not the applicant was the
recipient of the report albeit under a tri-partite agreement between the panel
doctor, DIMA and the applicant. He referred us to HMRC v Airtours [2011] STC 239 submitting that like Airtours which had been required, under a
tri-partite agreement with its lenders and accountants, to pay for services to
be provided by the accountants to its lenders to provide them with an insight
into its financial position, the medical examination and report although paid
for by an applicant was in fact supplied to DIMA.
53.
In support of this argument Dr Tallent emphasised the contractual
obligation for medical reports to be sent to DIMA. He also mentioned that the
applicant would not have attended a medical examination had he not applied to
DIMA in the first place.
54.
Mr Brown referred us to HMRC v Redrow Group Ltd [1999] STC 161 (“Redrow”)
as authority for the proposition that the normal position is that the recipient
of the supply will be the person who contracts and pays for it. However, we
note that Redrow concerned the recovery of input tax instructed and that
the House of Lords did conclude that the supply could include the grant of the
right to have services rendered to a third party.
55.
Mr Brown also took us to HMRC v Loyalty Management and Baxi Group Ltd
[2010] STC 2651 (“Loyalty Management”) in which the ECJ emphasised (at
[39]) that consideration of economic realities is a fundamental criterion for
the application of the common system of VAT and that this needs to be
considered when determining the nature of a supply and by whom and to whom a
supply is made. He cited the decision of the Tribunal (Judge Berner and Dr
Small) in In Reed Employment Ltd v HMRC [2011] UKFTT 200 (TC) where it
was said, at [72]:
“… the contracts between the various
parties are necessarily a starting point, but may not be determinative of the
nature of the supply or the consideration that has been given for it. That may
depend on an objective analysis of all the facts, having regard to the economic
purpose of the transactions. The search is for the economic reality, which may
or may not be determined by the contractual arrangements between the parties.”
56.
Therefore, in order to determine the economic reality of the supply as
required by Loyalty Management we first consider the contractual arrangements
between the parties.
57.
We have already noted (in paragraph 11, above) that the role and
obligations of a panel doctor are set out in the Instructions. Paragraph 6 of
these makes it clear that panel members “are not employees of the Australian
Government. They do not represent the Australian Government and no contractual
arrangement exists”.
58.
However, a contractual arrangement does exist between an applicant and a
panel doctor. The panel doctor provides a service, a medical examination for
the applicant who is responsible for the payment of the fee which is set by the
panel doctor not DIMA. This is clear from both the Form (which without the
“Applicant’s declaration” would not “become” the property of the Commonwealth
of Australia) and paragraph 10 of the Instructions (set out at paragraph 17,
above) which confirms that “Panel members outside Australia are not contracted
to, or paid by, the Australian Government for providing immigration health
examinations.”
59.
We also note that under paragraph 6.3 of the Instructions panel doctors
provide a service “on behalf of” and not “for” the Australian Government.
60.
Therefore, unlike the situation in Airtours there is not a
tri-partite agreement which involves DIMA but a bi-partite agreement between
the applicant and the panel doctor concerned under which the applicant selects
the panel doctor to undertake the medical examination and complete the report.
The applicant pays for this and although the report is sent to DIMA it is done
on the instructions of the applicant to facilitate his or her visa application.
This leads us to the inevitable conclusion that the economic reality of the
situation is that it is the applicant, who instructs and pays the panel doctors
and who also benefits from the services provided, and not DIMA who is the
recipient of these services.
Legitimate Expectation
61.
Both Dr Stanley and Dr Tallent referred us to the guidance provided by
HMRC in Notice 741 (May 2008) in particular paragraph 13.5 which refers to the
categories contained in paragraph 3 of schedule 5 VATA. Dr Tallent also refers
to the advice he was given by HMRC that the medical examination and reports
fell within paragraph 3 of schedule 5 VATA and that there were provided to DIMA
not the applicant. It is contended that they should be able to rely on this
guidance and advice and that they have a legitimate expectation that is will be
applied by HMRC even if it is not strictly in accordance with the letter of the
law.
62.
Following the decision of Sales J in Oxfam v HMRC [2010] STC 686 the Tribunal has adopted contrasting approaches when considering
whether it has jurisdiction to consider the issue of legitimate expectation eg accepting
the jurisdiction in Noor v HMRC [2011] UKFTT 349 (TC) and rejecting it St
Mary Magdalene College in the University of Cambridge v HMRC [2011] UKFTT 680 (TC).
63.
However, as it is clear from the decision of the Court of Appeal in R
v Secretary of State for Education ex p Begbie [2000] 1 WLR 1115 that
detrimental reliance is an essential part of any claim for legitimate
expectation, it is not necessary for us to consider the jurisdiction to the
Tribunal in this case as neither Dr Stanley nor Dr Tallent relied on the advice
and guidance of HMRC to his detriment. Any VAT on the services provided which
was repaid by way of voluntary disclosure was paid by the applicants and
accounted for to HMRC, also the amount sought by the recovery assessments do
not include any period between the erroneous acceptance of the voluntary
disclosure and the correction of the error
64.
Therefore, irrespective of whether or not we have jurisdiction to
consider this point, in the absence of detrimental reliance a legitimate
expectation claim cannot succeed
Conclusion
65.
In conclusion we find that the medical examinations and reports on
applicants for Australian visas undertaken by Dr Stanley and Dr Tallent were
services of a type principally and habitually supplied by doctors and not
consultants and were not or “similar” to services provided by consultants and do
not fall within paragraph 3 of schedule 5 VATA.
66.
These were therefore supplied in the United Kingdom where the provider
of the “belongs” in accordance with s 7 VATA.
67.
Even if we had found that the services were within paragraph 3 of
schedule 5 VATA and fell to be determined by reference to the recipient of the
services we find that this was the applicant in the United Kingdom and not
DIMA.
68.
Therefore these services were properly subject to VAT. As this had been
repaid to them in error HMRC were entitled to issue assessments to recover
these erroneous payments and interest under s 80(4A) and 78A VATA.
69.
Also, in the absence of evidence of detrimental reliance on advice and
guidance from HMRC any claim based on the legitimate expectation cannot
succeed.
70.
The appeals are therefore dismissed.
Right to apply for permission to appeal
71.
This document contains full findings of fact and reasons for the
decision. Any party dissatisfied with this decision has a right to apply for
permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure
(First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be
received by this Tribunal not later than 56 days after this decision is sent to
that party. The parties are referred to “Guidance to accompany a Decision from
the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this
decision notice.
JOHN BROOKS
TRIBUNAL JUDGE
RELEASE DATE: 21 May 2012
