Sally Moher at Premier Dental Agency v HMRC

Factual and Procedural Background

This appeal arises from a decision of the First-tier Tribunal which dismissed the appellant's claim against the refusal by the respondents, HM Revenue and Customs (HMRC), to repay output tax amounting to £609,119.31. The appellant, a qualified dental nurse who established an employment business in 1976, supplied temporary dental staff (mainly nurses and some auxiliaries) to dentists. The appellant charged dentists an hourly rate including VAT on these supplies, which she later contended should have been exempt from VAT. The claim for repayment was made pursuant to section 80 of the Value Added Tax Act 1994, following a House of Lords decision permitting late claims for overpaid VAT. The respondents denied repayment on the basis that the supplies were correctly treated as standard-rated. The First-tier Tribunal agreed with the respondents and dismissed the appeal. The appellant challenged this decision before the Upper Tribunal.

Legal Issues Presented

1. Whether the appellant’s supplies of temporary dental staff to dentists constituted supplies of staff (standard-rated) or supplies of medical treatment (exempt from VAT).
2. Whether the appellant, acting as principal or agent, made exempt supplies of medical care through the nurses and auxiliaries.
3. Whether the appellant was entitled to repayment of output tax under section 80 of the Value Added Tax Act 1994, based on the nature of the supplies.

Arguments of the Parties

Appellant's Arguments

• The appellant contended that she acted as principal making exempt supplies of medical care through qualified nurses and auxiliaries who provided treatment to dentists' patients.
• The contractual relationship was not determinative; the substance of the supply was medical care, not merely staff supply, consistent with the principles in Customs and Excise Commissioners v Reed Personnel Services Ltd.
• The appellant charged dentists hourly rates without a discrete commission, indicating that the supply was of medical services rather than staff.
• The exemption depended on the nature of the supply, not the supplier’s characteristics, supported by European case law including Ambulanter Pflegedienst Kügler GmbH v Finanzamt für Körperschaften I in Berlin.
• The appellant sought permission to amend grounds of appeal to argue that if supplies were not wholly exempt, output tax should be accounted only on the commission element, based on a later First-tier Tribunal decision in Reed Employment Ltd v Revenue and Customs Commissioners.

Respondents' Arguments

• The respondents argued that the tribunal’s finding that the appellant supplied staff and not medical services was a factual conclusion entitled to deference unless irrational.
• The tribunal considered the contractual relationships and the appellant’s concession that once assigned, the nurses were under the dentists’ control and direction.
• The respondents maintained that the appellant’s supply was of staff to dentists, who themselves supplied medical care to patients.
• The respondents opposed the appellant’s request to amend the grounds of appeal to raise the commission-only VAT argument, noting it was a new claim not previously before the First-tier Tribunal.

Table of Precedents Cited

Court's Reasoning and Analysis

The court analysed the nature of the appellant’s supplies by examining the factual findings of the First-tier Tribunal and the legal principles governing VAT exemptions. The tribunal found that the appellant supplied staff, not medical services, as once the temporary staff were assigned to dentists, they were under the dentists’ control and direction. The appellant did not control or supervise the staff during assignments nor dictate the treatment provided to patients. The court emphasized that the exemption depends on the nature of the supply rather than the qualifications of the supplier or staff. The appellant’s argument that she acted as principal making exempt supplies was rejected because the nurses and auxiliaries had no contractual relationship with the dentists or patients, and the appellant’s supply was effectively of staff to dentists who then supplied the medical care. The court also declined the appellant’s request to amend the grounds of appeal to argue for VAT only on commission, finding it was a new claim inappropriate at this stage.

Holding and Implications

The appeal was DISMISSED.

The court upheld the First-tier Tribunal’s conclusion that the appellant’s supplies were standard-rated supplies of staff, not exempt supplies of medical treatment. Consequently, the appellant was not entitled to repayment of output tax. The decision directly affects the parties by confirming the VAT treatment of the appellant’s business activities but does not establish new precedent beyond affirming the application of existing legal principles to the facts. The appellant’s proposed alternative claim regarding VAT on commission was not permitted at this appellate stage.