Ultralase Medical Aesthetics Ltd v Revenue & Customs

Factual and Procedural Background

The Appellant, Company A, provides surgical and cosmetic treatments for patients in hospitals and licensed premises, including its own clinics. The dispute concerns whether these procedures are exempt from Value Added Tax (VAT) under Schedule 9, Group 7, paragraph 4 of the Value Added Tax Act 1994 (VATA 1994), which exempts care or medical or surgical treatment carried out in a hospital or approved institution. The Respondents, the Commissioners for Her Majesty’s Revenue and Customs, contended that the location of the procedures alone (being in hospitals or licensed premises) justified exemption from VAT. The Appellant argued that, as the procedures were cosmetic and not medical care aimed at treating disease or health disorders, the supplies should be standard rated for VAT purposes.

The appeal was heard by Judge Porter and a tribunal member on 29 June 2009 in Manchester. Both parties produced documentary evidence, including witness statements from the Appellant’s personnel and legal authorities. The Appellant’s witnesses were unable to attend in person but their statements were admitted. The tribunal considered relevant European Court of Justice (ECJ) case law and domestic guidance on VAT exemptions for medical and cosmetic services.

Legal Issues Presented

1. Whether the provision of cosmetic interventions by the Appellant in hospitals and licensed premises qualifies for exemption from VAT under Schedule 9, Group 7, paragraph 4 of VATA 1994.
2. Whether the VAT exemption depends solely on the location where the services are provided or on the purpose of the intervention, specifically if it is for treating disease or health disorders.
3. The applicability of European Directive 2006/112/EC Article 132 and relevant ECJ case law concerning the scope of exempt medical care and related activities.

Arguments of the Parties

Appellant's Arguments

• The Appellant’s services are cosmetic rather than medical and are aimed solely at improving personal appearance, not diagnosing, treating, or curing disease or health disorders.
• The exemption from VAT should be narrowly construed and based on the purpose of the treatment rather than the location where it is performed.
• The Appellant actively ensured that no medical issues were treated and that clients with health concerns were referred to their own doctors.
• Domestic guidance and European case law support that purely cosmetic services are standard rated for VAT.

Respondents' Arguments

• The Respondents argued that the provision of services in hospitals or licensed premises is sufficient to qualify for VAT exemption under the relevant statutory provisions.
• Some treatments offered by the Appellant have medical aspects and should be considered exempt.
• European Court of Justice rulings indicate that the place where the service is provided is a key criterion for exemption under Article 132(1)(b) of Directive 2006/112/EC.
• The assessment of approximately £400,000 was raised on the basis that the services were exempt due to their location.

Table of Precedents Cited

Court's Reasoning and Analysis

The tribunal examined both domestic legislation and European Directive 2006/112/EC Article 132, focusing on the purpose and location of the services. The Directive and case law establish that VAT exemption for medical services aims to ensure public access to health care by reducing costs. The exemption applies only to services with the purpose of diagnosing, treating, or curing disease or health disorders.

The tribunal considered the Appellant’s evidence, including witness statements, which confirmed that treatments were cosmetic, aimed at enhancing appearance, and not medical care. The Respondents argued that location alone (hospitals or licensed premises) should suffice for exemption, citing ECJ case law. However, the tribunal found that the purpose of the treatment is decisive.

Relevant ECJ judgments, particularly Ambulanter Pflegedienst Kugler and Christoph-Domnier-stiftung, were interpreted to mean that only interventions with a therapeutic purpose qualify for exemption, regardless of location. Cosmetic treatments, even when provided in hospitals or licensed clinics, do not meet this criterion.

The tribunal also referred to domestic guidance which differentiates between treatments undertaken as part of a health care programme (exempt) and those provided purely for cosmetic reasons (standard rated). The Appellant’s procedures fell into the latter category.

Holding and Implications

The tribunal held that the Appellant’s cosmetic interventions do not qualify for VAT exemption under Schedule 9, Group 7, paragraph 4 of VATA 1994 because their primary purpose is not the diagnosis, treatment, or cure of disease or health disorders, notwithstanding that they are performed in hospitals or licensed premises.

The Appellant’s appeal was allowed to the extent that the services are standard rated for VAT purposes rather than exempt.

The decision clarifies that the VAT exemption for medical services depends on the purpose of the treatment rather than solely the location. Consequently, cosmetic treatments provided in hospitals or licensed clinics are standard rated unless they form part of a treatment programme aimed at health care. No new precedent was established beyond applying existing European and domestic law principles to the facts.