Factual and Procedural Background
This appeal concerns the interpretation of Article 132.1(b) and (c) of Council Directive 2006/112/EC (the Principal VAT Directive) regarding whether services provided by Company A, consisting of collection, testing, processing, and storage of umbilical cord blood stem cells for future therapeutic use, may be exempt from VAT under those provisions.
Company A is a UK private limited company, registered for VAT since August 2004, accredited and licensed to supply haemopoietic progenitor cells and operate as a private stem cell bank. Its services enable stored stem cells to be used autologously or allogeneically.
Stem cells are collected at birth, processed, tested for contamination, cryopreserved, stored, and released on request for medical treatments. The dispute arises because the tax authority treats the services as a single taxable supply of storage, while Company A contends that the entire supply or its components should be VAT exempt.
The contractual process involves sending a collection kit to parents, collection of cord blood by a medical professional, transport to Company A’s laboratory, testing, processing, cryopreservation, storage, and eventual release of stem cells for treatment.
There are two payment options: one with initial fees plus annual storage fees, and another with a single pre-payment covering 20 years. The pricing breakdown shows most costs relate to processing, testing, and analysis, with storage comprising a smaller portion.
Company A’s activities are supervised by a registered Clinical Scientist, who ensures adherence to high clinical standards. HMRC guidance generally exempts services by health professionals under the Health Professions Order 2001.
Under domestic legislation (Value Added Tax Act 1994), certain medical services and products derived from human blood are VAT exempt. Initially, HMRC ruled that collection and testing were exempt, but later revoked this, ruling that testing and analysis of a customer’s own blood could not be exempt and that the supply was a composite taxable supply dominated by storage.
Company A appealed this ruling, arguing that its supplies constitute either a single composite supply of prophylactic medical care or separate exempt supplies under the Principal VAT Directive.
The referring tribunal also noted similar pending proceedings before the Court of Justice from another Member State concerning related issues.
Consequently, the tribunal referred specific questions to the Court of Justice regarding the interpretation of "hospital and medical care" and "medical care" under Article 132.1(b) and (c) of the Principal VAT Directive, specifically whether various components of Company A’s services fall within these exemptions.
Legal Issues Presented
- Whether the expression "hospital and medical care" in Article 132.1(b) of the Principal VAT Directive includes one or more of the following services provided by Company A: provision of a cord blood collection kit; testing of cord blood; processing of blood to extract stem cells; storage of blood and stem cells; and release of stem cells for medical treatment.
- Whether the concept of activities "closely related" to hospital and medical care in Article 132.1(b) includes all or any of these services.
- Whether the expression "the provision of medical care" in Article 132.1(c) includes one or more of the same services when carried out or supervised by suitably qualified medical professionals.
Arguments of the Parties
Appellant's Arguments
- The supplies made by Company A constitute a single composite supply of prophylactic medical care within the scope of Article 132.1(c) of the Principal VAT Directive.
- Alternatively, the supplies constitute a single composite supply of hospital and/or medical care or activities closely related to such care under Article 132.1(b).
- If the supplies are separate transactions, each component (collection, testing, analysis, processing, cryopreservation, and release) qualifies as an exempt supply under Articles 132.1(b) and (c).
Respondent's Arguments
- HMRC initially ruled that collection and testing were exempt supplies but later revoked this, ruling that testing and analysis of a customer’s own blood cannot be exempt as the company cannot supply a customer’s own tissue.
- HMRC contends the contractual arrangement is a composite supply dominated by storage services, which are taxable.
- Storage of stem cells does not constitute "care or medical or surgical treatment" under domestic law and is therefore not exempt.
- Testing, analysis, and processing do not qualify as exempt medical care, even if provided by registered health professionals.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Case C-262/08, Copygene A/S v Skatteministeriet |
Whether activities similar to those in this case fall within VAT exemption for activities "closely related" to hospital care under the Sixth VAT Directive. |
The Court noted the Danish case concerns similar activities but does not address all relevant provisions; the present appeal is to be dealt with together with Copygene. |
Court's Reasoning and Analysis
The court analyzed the precise scope of Article 132.1(b) and (c) of the Principal VAT Directive, focusing on whether the services provided by Company A should be considered "hospital and medical care" or "medical care" exempt from VAT. It examined the nature of each component service—collection, testing, processing, storage, and release—against the definitions and previous interpretations of medical care and related activities.
The court considered the accreditation and supervision of Company A by qualified medical professionals, the clinical purpose of the services, and the regulatory framework governing the activity.
It also took into account the domestic legislation provisions on VAT exemption for medical services and products derived from human blood, as well as HMRC’s rulings and their legal reasoning regarding composite supplies and ancillary services.
Finally, the court framed specific preliminary questions for the Court of Justice to clarify the interpretation of the VAT Directive exemptions in the context of the services provided by Company A.
Holding and Implications
The court referred specific questions to the European Court of Justice for a preliminary ruling.
The direct effect of this decision is to seek authoritative guidance on the VAT exemption status of the services provided by Company A, pending which the appeal remains unresolved. No new precedent was established by this court itself; rather, it facilitated clarification by the Court of Justice on the interpretation of the Principal VAT Directive.