Key Facts
- •Spectrum Community Healthcare CIC (Spectrum) provides healthcare services in English prisons under contract with NHS England (NHSE).
- •Spectrum argued that supplies of prescription drugs and contraceptives were separate, taxable supplies, allowing VAT recovery.
- •HMRC and the FTT held that Spectrum made a single exempt composite supply of healthcare, including drugs and contraceptives.
- •Spectrum appealed to the Upper Tribunal (UT) on several grounds.
Legal Principles
Each supply must be regarded as separate and distinct, subject to exceptions for ancillary services, single indivisible economic supplies, or closely related activities sharing exemption.
Article 1(2) and Article 2 of the Principal VAT Directive (PVD); Frenetikexito, CPP, Levob
A single supply has a single tax treatment, even if different VAT rates apply to its components. The predominant element dictates the classification of the whole supply.
Stadion Amsterdam CV, HMRC v Gray and Farrar International, Město Žamberk
Article 132(1)(b) and (c) of the PVD exempt certain healthcare transactions. Exemption (c) is narrower than (b) and does not include 'closely related activities'.
Article 132 PVD
In determining single/multiple supplies, the perspective of the typical consumer is relevant. This is usually the recipient of the supply.
CPP, Everything Everywhere, Frenetikexito
EC v UK and Klinikum decisions clarified the scope of exemption (c), particularly regarding the supply of goods alongside services. Minor goods strictly necessary and not physically and economically dissociable from the service are exempt.
EC v UK, Klinikum Dortmund
Outcomes
Appeal dismissed.
The UT upheld the FTT's finding that Spectrum made a single exempt composite supply of healthcare. The UT rejected Spectrum's arguments based on EC v UK and Klinikum, finding that these cases did not preclude a single supply analysis encompassing drugs and contraceptives. The UT also held that NHSE, as the contractual recipient, was the relevant typical consumer for assessing single vs. multiple supplies.