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	United Kingdom VAT & Duties Tribunals Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> The Burmese Cat Benevolent Fund v Revenue & Customs [2007] UKVAT V20015 (14 February 2007) URL: http://www.bailii.org/uk/cases/UKVAT/2007/V20015.html Cite as: [2007] UKVAT V20015

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20015

VALUE ADDED TAX – Zero Rating – whether medicinal products supplied to charity solely for use by it in providing care or medical treatment for animals - Item 9 Group 15 Schedule 8 VATA- vet administered drugs part of supply of treatment by vet analogous to Dr Beynon – "takeaway drugs" not supplied to charity – not for charity's sole use – appeal dismissed

LONDON TRIBUNAL CENTRE

THE BURMESE CAT BENEVOLENT FUND Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY'S

REVENUE AND CUSTOMS Respondents

Tribunal: ADRIAN SHIPWRIGHT (Chairman)

ROY L JENNINGS FCA FTII ATT

Sitting in public in London on 19 October 2006

Dr Adrian Seville, Pro Bono Lay Representative, for the Appellant

Kieran Beal, Counsel, instructed by the Acting Solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2007


 


DECISION

Introduction

1. This is an appeal by The Burmese Cat Benevolent Fund ("BCBF") against a refusal on review to treat certain supplies made by veterinary surgeons as zero rated. The review decision is contained in a letter dated 28 September 2005.
2. This is a decision in principle only. As the parties requested we leave the implementation to be decided between the parties if possible. Our jurisdiction is only to decide the issue before us and so we have no jurisdiction to give guidance as to the future as the Appellant requested.

The Issue

3. The issue for determination here is essentially whether medicinal products were supplied to the charity, BCBF, solely for use by the charity in providing care or medical or surgical treatment for animals in the circumstances under consideration such that zero rating is available.

The Law

The Legislation

4. The Law in so far as is relevant is found in Item 9 Group 15 Schedule 8 VATA which provides for the zero rating of:

"The supply to a charity, providing care or medical or surgical treatment for human beings or animals, or engaging in medical or veterinary research, of a medicinal product where the supply is solely for use by the charity in such care, treatment or research".

5. Notes (11) and (12) to Group 15 read:

"(11) In item 9—

(a)     a "medicinal product" means any substance or article (not being an instrument, apparatus or appliance) which is for use wholly or mainly in either or both of the following ways—

(i)     by being administered to one or more human beings or animals for a medicinal purpose;

(ii)     as an ingredient in the preparation of a substance or article which is to be administered to one or more human beings or animals for a medicinal purpose;

(b)     a "medicinal purpose" has the meaning assigned to it by section 130(2) of the Medicines Act 1968;

(c)     "administer" has the meaning assigned to it by section 130(9) of the Medicines Act 1968;

(12) In items 9 and 10 "substance" and "ingredient" have the meanings assigned to them by section 132 of the Medicines Act 1968".

6. The relevant parts of section 130 of the Medicines Act 1968 (as amended) are as follows:

"130 Meaning of "medicinal product" and related expressions

…

(2) In this Act "a medicinal purpose" means any one or more of the following purposes, that is to say—

(a) treating or preventing disease;

(b) diagnosing disease or ascertaining the existence, degree or extent of a physiological condition;

(c) contraception;

(d) inducing anaesthesia;

(e) otherwise preventing or interfering with the normal operation of a physiological function, whether permanently or temporarily, and whether by way of terminating, reducing or postponing, or increasing or accelerating, the operation of that function or in any other way.

…

(9) In this Act "administer" means administer to a human being or an animal, whether orally, by injection or by introduction into the body in any other way, or by external application, whether by direct contact with the body or not; and any reference in this Act to administering [or feeding] a substance or article is a reference to administering [or feeding] it either in its existing state or after it has been dissolved or dispersed in, or diluted or mixed with, some other substance used as a vehicle."

7. Section 132 of the Medicines Act 1968 gives general definitions. In that section:

"ingredient", in relation to the manufacture or preparation of a substance includes anything which is the sole active ingredient of that substance as manufactured or prepared;

"substance" means any natural or artificial substance, whether in solid or liquid form or in the form of a gas or vapour."

The Authorities

8. We were provided with copies of the following authorities which we have read and considered:

Benyon & Partners v HMRC [2004] UKL 53

Institute of the Motor Industry v CCE 1998] STC 1219

Stichting Uitvoering Fianciele Acties v Staatssecretaris van Financien Case 348/87

CCE v Redrow Group plc [1999] STC 161

Ashfield District Council v CCE [2001] 1706

WHA Ltd v CCE [2004] STC 1081

HMRC v Jeancharm Ltd (t/a Beaver International) [2005] STC 918

London Borough of Camden v CCE Decision Number 17211

Edinburgh Leisure Decision Number 18784

The Evidence

9. An agreed bundle of documents was produced. No objection was taken to any of them and they were all admitted in evidence.
10. We heard evidence from:

(1) Mr G S F Wilkin, one of the Appellant's trustees; and

(2) Mrs Clements, the reviewing officer.

Witness statements were provided for each of them which stood as their evidence in chief. They were cross examined.

Findings of Fact

11. From the evidence and documents we make the following findings of facts:

The BCBF

(1) The Burmese Cat Club Benevolent Fund is a registered charity established by a trust deed. It is a separate entity from the Burmese Cat Club. It was common ground that BCBF was a charity providing care or medical or surgical treatment for animals.

(2) The objects of the BCBF include the "relief of suffering and distress of Burmese or other cats that are old sick unwanted abandoned lost or distressed particularly by the provision of care and accommodation for such animals".

(3) The powers of the BCBF include power:

a. To rehome cats acquired by the trustees;

b. To acquire cats from pet shops;

c. To arrange euthanasia for cats found to be suffering from incurable conditions when and only when in the opinion of the trustees a reasonable quality of life can no longer be sustained;

d. To support owners of rehomed or rehoused cats when such cats develop conditions unknown or not present at the time of rehoming or rescue that require treatment that the owners are unable to afford without support;

(4) The BCBF rehomes about 300 cats a year.

(5) Mr Wilkin, the original appellant, is a trustee of the Fund. His fellow trustees are Maureen Smith, Margaret Somers, Jeremy Potter and Dina Buxton.

The Correspondence

(6) In September 2003 written inquiry was made on behalf of the Appellant of the HMRC National Advisory Service ("NAS") concerning the possibility of having veterinary work zero rated.

(7) The Commissioners' response was contained in a letter of advice from Mrs Ward of the NAS to Mr Wilkin dated 17 October 2003, which stated as follows:

"The Law provides for the Zero Rating of medicinal products which are to be administered to animals for a medicinal purpose when such medicinal products are supplied to a Charity providing care or medical or surgical treatment for animals.

For each supply, you must provide your supplier with a completed certificate as per Annex 1 which you have.

The Zero Rating mentioned above only applies to medicinal products not to the administration of such products by a vet or to any other medical or surgical treatment.

I would have thought that many vets would have encountered this situation previously."

(8) A telephone inquiry was received in January 2005 from a Veterinary Surgeon seeking clarification as to whether zero rating applied. The NAS took the view that as the new 'owner'of the cat had received the supply of the drugs and they were not a charity zero rating did not apply.

(9) This was followed in March 205 by a letter seeking further clarification as Mr Wilkin of the BCBF was said to have received different advice in October 2003.

(10) On 21 March 2005 Mr Dobson of the NAS wrote to the Veterinary Surgeon confirming the advice given in January 2005 but emphasising that it was based on the factual background provided. Accordingly, the vet applied standard rate VAT to the relevant bills.

(11) In May 2005 the BCBF asked for a reconsideration of the ruling concerning the zero rating of medicinal products for animals.

(12) After requests for further information and sample documentation the reconsideration officer concluded her deliberations. She set out her conclusions in a letter dated 28 September 2005. She wrote:

"in [BCBF]'s case the supply of the medicinal products only, by vets to the charity, to be administered by [BCBF], may be zero rated. Zero rating does not extend to medicinal products administered by vets to cats owned by [BCBF], or their new owners, or any other medical or surgical procedures supplied by vets … [R]elief is restricted to charities that will be using the products themselves".

New Owners

12. We find that the basic position in relation to the assistance provided by the BCC to new owners appears to be as follows:

(a) A Burmese (or other) cat will be transferred to a new owner as part of BCBF's re-homing programme;

(b) If the new owner lacks sufficient means, the BCBF may give an oral assurance that it will meet vet's bills in relation to the existing medical problems of the cat which require treatment. Such an assurance may be given in certain cases in respect of unknown and unforeseen conditions that may develop in the future;

(c) If a condition develops, the new owner takes the cat to a vet;

(d) The vet may carry out treatment on the cat (for which VAT is charged at the standard rate) and prescribe medication for administration to the cat by its new owner back at their home (referred to as 'take away' medication);

(e) The arrangement for treatment where a cat has been re-homed, in the first place, is between the new owner and the Vet. BCBF does not approve the consultation of the vet before it takes place nor does there seem to be any direct and immediate link between the vet and the BCBF other than discharge in some cases directly of the new owner's obligations to the veterinary surgeon. We find this as a fact.

(f) The treatment is requested by the new owner and the BCBF may reimburse the new owner for the cost of the treatment. We find this as a fact.

(g) In one case (that of Prudence), the vet has directly invoiced the BCC for his work and for the prescribed medication. We consider that this is for administrative convenience and is still a way of the new owner's obligations being discharged and reimbursement made by the BCBF. This is a shortcut to achieve that. It does not constitute a supply to the BCBF.

(h) In two cases (Soda Pop and Arthur), the BCBF has been invoiced for VAT charged on the supply of medicines to cats by a vet in the course of the vet's treatment of the animal;

(i) The Appellant seeks zero-rating in respect of both the take-away medication and that applied by a vet in the course of his or her treatment of a cat both of which are consequent on the veterinary surgeon's involvement initiated by the new owner.

The Agreed Facts

13. The Appellant and the Respondent agreed that paragraphs 5-24 of the Statement of Case are facts agreed between the parties. Insofar as not dealt with above, they provide, and we find as a fact.

(1) [Following a request from HMRC] the Appellant provided documents with annotated comments under cover of a letter dated 20 June 2005. The documents included detailed documents regarding the transfer in ownership and subsequent medical treatment of eight cats, together with a copy of the Fund's Trust Deed.

(2) By letter dated 28 September 2005, Mrs Clements [the Review Officer] wrote to the Appellant with the outcome of her reconsideration. Having set out a summary of the Appellant's contentions and the relevant legal provisions, Mrs Clements concluded that:

"This confirms that in BCC's case, the supply of the medicinal products only, by vets to the charity, to be administered by BCC, may be zero-rated. Zero-rating does not extend to medicinal products administered by the vets to cats owned by BCC, or their new owners, or any other medical or surgical procedures supplied by vets… [R]elief is restricted to charities that will be using the products or substances themselves."

(3) Mrs Clements also took issue with a number of the factual statements made by the Appellant in his letter of 20 May 2005, having examined the documents provided. In particular she noted that:

i. There was no distinction on the face of the re-homing agreements between the terms applying to cats over ten years old and any others;

ii. There was no evidence on the face of the re-homing agreements of a continuing responsibility being assumed by the BCC. The only document which indicated that the BCC would pay for vet's bills was a note from Sue Chase of Starrycats to that effect. The Commissioners note that Sue Chase does not appear to be one of the Trustees of the BCC;

iii. It did not appear that in all cases the BCC was invoiced directly by the vet. Mrs Clements attached a list of her conclusions in respect of the eight different cats chosen as samples by the Appellant.

(4) The findings for each cat were as set out in the Table below:

Table A

Number	Cat's name	Comments on documentation
[1]	Norman	No re-homing agreement had been provided. The vets bills were made out to the new owner	No dispute
[2]	Jimmy	The vet's bill directed to the BCC which pre-dates rehoming did not contain a zero-rated supply of medicines. The remaining invoices were made out to the new owner. The undertaking to meet the veterinary costs was given by Sue Chase of Starryc[h]ats Burmese, not by a trustee of BCC. No such undertaking was contained in the re-homing agreement. The person seeking reimbursement of the vet's bill was not the new owner but Sue Chase.	No dispute
3	Figaro	The undertaking to meet the veterinary costs was given by Sue Chase of Starryc[h]ats Burmese, not by a trustee of BCC. No such undertaking was contained in the re-homing agreement. The person seeking reimbursement of the vet's bill was not the new owner but Sue Chase. The Commissioners also note that the new owner requested not payment of all of the vet's bill but only a donation of £30 towards the costs.	No dispute
4	Ying	No re-homing agreement had been provided. The vets bills were made out to the new owner.	No dispute
5	Prudence	No re-homing agreement had been provided. The vets bills were made out to Maureen Smith of the BCC. The recipient of the vet's services was the new owner	Issue
6	Soda Pop	Zero-rating could be claimed on drugs supplied to BCC for Soda Pop's care or treatment prior to re-homing provided that they were administered by the BCC and not by the vet. The Commissioners note that no further confirmation in this regard has been received.	Issue
7	DD	All invoices after re-homing made out to the new owner.	No [report]
8	Whispa	All invoices after re-homing made out to the new owner.	No [report]

(5) Mrs Clements concluded that:

Ownership of the cats had clearly transferred to the new owners;

There was no ongoing responsibility for BCC unless the new owner requested assistance with the vets bills because they were unable to fund these themselves;

The new owners were the recipients of the vets' supplies of medicinal products even though BCC might pay for them, either directly or by reimbursing the new owner.

In addition, as item 9 restricted zero-rating to charities that purchased medicinal products solely for their own use, drugs administered by the new owners would be ineligible for zero-rating.

Mrs Clements accordingly upheld the decision that BCC are not entitled to zero-rating of medicinal products supplied to new owners of cats where BCC paid the vets' bills.

(6) The Appellant filed a Notice of Appeal against that decision on or about 12 October 2005…"

14. The Appellant at a directions hearing on 26 May 2006 conceded in effect that any supplies of medicines where invoices were made out in the name of the cat's new 'owner' and not to the BCBF would not qualify for zero-rating.
15. Accordingly, there was no longer an issue as to the following sample cats:

Cat 1 Norman

Cat 3 Figaro

Cat 4 Ying

Cat 7 DD

Cat 8 Whispa

16. The Appellant in his witness statement confirmed that no issue arises in relation to Cat 2, Jimmy.
17. The samples in dispute are thus:

Cat 5 Prudence

Cat 6 Soda Pop

18. In Prudence's case no written rehoming agreement had been provided. We agree with the Reviewing Officer that the services were received by the new owner, not BCBF and we so find. Essentially this was a case of reimbursement.
19. In Soda Pop's case we agree that zero-rating might have applied before rehoming if BCBF had administered the drugs. After rehoming the position was the same as in Prudence's case.

The Submissions of the Parties

The Appellant Submissions in outline

20. In essence, the Appellant submitted that:

I As to Supply

(a) The supply of medicinal products invoiced to the BCBF by a veterinary surgeon in the course of treatment of a rehomed animal for which the BCBF has retained responsibility after the transfer of ownership to the new carer is a bona fide supply direct to the BCBF for the purposes of VAT and not a case of indirect reimbursement as HMRC contend.

(b) Redrow supports this as does WHA.

(c) The absence of a written contract between the BCBF and the veterinary surgeon is simply a matter of custom and practice in the charitable sector.

(d) The supply of medicinal products in the circumstances of the treatment of rehomed cats paid for by the BCBF is bona fide to the BCBF which makes payment in pursuance of its charitable objects. That this benefits the cat and the owner is no bar.

II As to Administration of the Medicines

(a) The use to which the medicines are put is squarely within its charitable objects such that the relief should be given. The Appellant does not accept that the wording of the item limits the relief to cases where the medicines are administered to a cat owned by the BCBF.

21. Accordingly zero rating is available.

HMRC's Submissions

22. In essence, HMRC submitted:

(a) There were three issues:

i. A pure issue of construction of the words "solely for use by the charity" in the relevant zero rating provision (item 9 of Group 15);

ii. Whether there was a supply to the charity;

iii. Whether there was a composite supply following Benyon?

(b) The words of the item were limiting. The providing of what they cover would be the purchase in bulk of a certain drug by an animal charity for the charity to use. They did not cover the supply to the new owner even if reimbursed by BCBF.

(c) The supply in the two samples left was to the new owner, not BCBF.

Discussion

23. The submissions of the parties raises three questions:

(i) Was there a composite supply?

(ii) If there was a single supply, to whom was it made?

(iii) Does the supply fall within Item 9 Group 15?

Was there a composite supply?

Vet administered drugs and medicines

24. In our view there is a composite supply here where the vet supplies veterinary services and medicines which the vet administered. We respectfully adopt the approach of Lord Hoffman (with whom the other Lords agreed in Benyon. It was said at paragraph [31]:

"this approach [ie the Court of Appeal's] seems to me to involve the kind of artificial dissection of the transaction which the Court of Justice warned against in its judgment in the Card Protection case [1999] STC 270, [1999] ECR I-973, para 29. In my opinion the level of generality which corresponds with social and economic reality is to regard the transaction as the patient's visit to the doctor for treatment and not to split it into smaller units. If one takes this view, then in my opinion the correct classification is that which the NHS has always taken of the personal administration of drugs to non-reg 20 patients, namely that there is a single supply of services".

25. We accept the "holding" in the Headnote as sufficient for our purpose in respect of drugs administered by the vet. It reads:

"The level of generality which corresponded with social and economic reality, and did not involve artificial dissection, was to regard the transaction as the patient's visit to the doctor for treatment. On that view the correct classification of the personal administration of a drug to a patient was that it was a single supply of medical services. While, in some cases, the element of skill on the part of the doctor would be at a minimum, it was essential for practical reasons to have a rule which applied across the board to all transactions of a certain kind when applying the classifications required by VAT".

We find this to be the case here in respect of drugs and medicines administered by the veterinary surgeon.

"Takeaway Drugs"

26. The preceding paragraphs deals with drugs and medicines administered by a veterinary surgeon. This leaves the question of drugs and medicines not administered by the veterinary surgeon or "takeaway drugs". We have no evidence before us that they were supplied to the BCBF. On the evidence before us in the two cases in issue the takeaway drugs were supplied to the new owner and not the BCBF. We confirm that we find this as a fact.

Redrow approach

27. We do not consider that what is involved here falls within the Redrow line of cases. Essentially, what happens here is that there is a financial reimbursement of the new owner by BCBF of the cost of the supplies made by the vet to the new owner. There is no supply in those circumstances to BCBF. There is not a sufficient link for this to be the case and we so find. BCBF is reimbursing the new owner and we so find. We find this to be the case even if the payment is made direct by the BCBF to the veterinary surgeon.
28. We find on the evidence before us that this is a simple case of reimbursement. The more complicated analysis of the Redrow line of cases does not fit the factual position here as it is not what happens and is unnecessary. Redrow, in our opinion, does not apply to a simple case of reimbursement. More is needed and that is not the case here. The veterinary surgeon made supplies to the new owner. The BCBF reimbursed the new owner.

Was there a single supply, if so to whom?

29. We consider that the supplies here were made to the new owner and we so find. We find that none of the supplies still in issue before us were made to the BCBF. All those supplies were made to the new owner who was reimbursed by the BCBF.

Does the supply fall within Item 9?

30. To fall within the zero-rating provision the supply must be made to a charity solely for use by the charity in the care of the cats. Here we have found that there is no supply to the charity in the circumstances under consideration. Accordingly, such supplies could not fall within the zero-rating provisions. However, for the sake of completeness we deal with the issue argued before us whether the drugs and medicines were used by the charity in the care of the cats. In our view they were not. They were used by the veterinary surgeon when he administered them and by the new owners when they had the unenviable task of seeking to administer them to the cat.
31. Even if they were used by the Charity (which we have found was not the case) then the goods, ie the medicines would need to be solely for use by the charity in the care of the cats. Here the medicines were used by the vet and not the charity when he administered them and by the new owner when he or she administered. This is not use solely by the BCBF even if it could be said to be joint use, we find is not the case. We find this as fact. Accordingly such supplies could not on the facts as found by us fall within Item 9 and attract zero-rating. They remain standard rated.

Conclusion

32. We have found that here the supply was to the new owner and not BCBF. It was not a supply of medicines to BCBF solely for its use in the care of the cats. Consequently, the terms of Item (9) are not fulfilled and zero-rating is not available.
33. Accordingly, the appeal is dismissed. We make no order as to costs.

ADRIAN SHIPWRIGHT

CHAIRMAN

RELEASE DATE: 14 February 2007

LON/2005/1059