“transaction[s], including negotiation, concerning deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments, but excluding debt collection and factoring.”
“(1) The background is that in the last ten years the number of dentists prepared to treat patients for the NHS scale of fees has reduced and dentists have moved to treating patients privately. The result is that the dentist sees fewer patients at a higher rate enabling him to spend longer with each patient. [Denplan] was formed in 1986 and assists this change by enabling patients to pay a fixed monthly fee for their private treatment. [Denplan] was taken over in 1993 by the Private Patients Plan Limited and is now a subsidiary of Axa PPP Healthcare Group Plc. (2) The current split of dental patients is that 61% pay under the NHS system, 24% pay privately per visit, 10% pay under a plan covering preventative care only, and 6% by a plan covering all treatment. (3) A dentist whose patients wish to participate in one of [Denplan’s] plans must first register with [Denplan] as a member for a one-off fee of£60 (£50 if the dentist is a member of certain bodies). The dentist must submit a self-assessment of his practice (dealing with such matters as disabled access, equipment and facilities, infection control and sterilisation procedures, patient records, management of collapse, radiography, practice management and practice administration) with the application, which must be approved by [Denplan] before he can register. Having registered there is no obligation on the dentist to take any further services from [Denplan]. (4) The next step is for the dentist to set up a registration facility, for which he pays a one-off fee of£35 . At this stage this merely records the dentist’s details including bank details and forms the basis for registration of patients who take out plans. Again, there is no obligation on the dentist member with a registration facility to take any further services from [Denplan]. (5) Thirdly, the dentist may enter into contracts with patients and register patients on a plan (to whom we shall refer as “plan patients”). The available plans are Denplan Care (its core product), covering all treatment and including an insurance element to cover emergencies; Denplan Essentials covering only routine care and also insurance for emergencies; and Denplan Essentials for Children (enabling children to be registered separately from their parents; the other plans enable children to be included in a family plan). The patient contracts with the dentist for one of these plans for a year for a monthly charge set by the dentist. For Denplan Care there are five categories depending on the patient’s dental condition each with different fees. There is no contract between [Denplan] and the patient. The patient also contracts to pay the annual charge by monthly payments plus an additional month’s charge for his registration with [Denplan], which includes his name, address, dental records and other details. Alternatively a patient can pay an annual amount in advance by direct debit, in which case instalments are paid monthly to the dentist and meanwhile [Denplan] holds the money on the terms of an express declaration of trust in favour of the dentist. (6) The monthly charge for [Denplan’s] services paid by the dentist to [Denplan] varies according to the number of patients registered with plans. In 2003 this varied between 21p (2000 or more patients in plans per dentist) to£1.63 (up to 25 patients) with an overall average per patient of 71p. The insurance cost is a fixed£1.26 . The fee and insurance premium is taken by [Denplan] out of money collected from patients before accounting to the dentist. Accordingly, if no payment is made by the patient, for example because there was no money in his bank account out of which to take the direct debit, no fee would be paid by the dentist to [Denplan]. (7) [Examples are given of the income derived by Denplan in 2003 from various sources, including membership fees, registration fees, monthly fees and insurance, and insurance commission]. (8) The mechanism of payment is that the patient completes a direct debit mandate at the same time as joining a plan, which [Denplan] enters on its computer and lodges the bank account details with the patients’ banks. [Denplan] creates a BACS file (day 1) and sends it to BACS to instruct it to collect fees from patients. If payment is not received it receives a report of unpaid amounts (day 5) and writes to patients requesting payment. Upon receipt of the direct debit payments (day 3) it reconciles the payments received with payments to be made to dentists (day 10). It creates a BACS file for the payments to dentists and sends this to BACS (day 14). It sends out a report of payments and unpaid amounts to the dentists (day 15) and the dentist receives payment (day 16). The monthly report of payments and non-payments also analyses total patient registrations, a breakdown of Denplan Care patients into each of the five categories and the fees, percentage and number of patients in each, a list of new registrations, a list of implants rebate payments, change[s] of address, and a full patient list showing for each patient the fees collected that month, [Denplan’s] fees and the net amount due to the dentist. (9) [Denplan] provides other services to dentists who are members, including Denplan Excel Quality for which the dentist pays a separate joining fee and monthly fee. The dentist is required to comply with items not included in the quality assurance programme. Patients are given a score out of 100 for their oral health. This enables better communication between the dentist and the patient through a patient questionnaire mailed to the patients every 24 months. [Denplan] also provides courses on practice care for member dentists [for] which fees are charged, and bespoke courses are also arranged. (10) Denplan Enhance is a plan available to non-members under which the dentist can offer a payment plan for expensive treatment by a third-party finance house offering an interest-free loan for periods up to 36 months for which [Denplan] receives a commission for acting as an intermediary. The patient pays off the loan by monthly instalments. The dentist receives a discounted figure for his full fee depending on the period of the loan [details of the discount are then given]. (11) Not all dentists solely becoming members or becoming members plus setting up a registration facility have plan patients. Currently 15% … are members with no registration; and 2% … have membership and a registration facility but no plan patients. The remaining 83% … are members with registration and have plan patients. About 50 dentists who have registered or set up a registrations facility but without any plan patients will be in process of setting up patients’ plans. No analysis of the rest has been made but some will be still practising and presumably expecting to sign patients with plans, and some will be retired since membership is for a one-off payment and continues when the dentist retires. (12) The relationship between the dentist and [Denplan] is governed by the Rules of Denplan of which there are 2003 and 2006 versions. The Denplan rules provide: (a) Membership requires the completion of an application form and a Self-Administered Practice Assessment and payment of the membership fee. (b) A registration facility is a facility for registering contracts with the dentist’s patients for which a registration charge is made. A dentist may have separate registrations for different locations or for different assistants. (c) [Rule 6.1 of the 2003 Rules is here set out in full]. (d) The 2006 Rules are in more modern language but are essentially the same except that for financial services reasons insurance is now dealt with under a separate heading … (e) When [Denplan] collects charges and fees and gives notices of changes in fees and other administrative matters it acts as the member’s agent and is deemed to have all necessary authority for that purpose. (f) Members may change their fee rates for plan patients on 1 January only. (g) [Denplan] provides complaint handling and arbitration services for the resolution of disputes arising from care and treatment provided to registered patients. (h) Fees collected by [Denplan] from patients are held on behalf of members but they are permitted to deduct any amounts due to [Denplan]. … (13) Although not included in the Rules, [Denplan] provides a survey to assist members in setting fees by collecting information from members and providing averages broken down by postcodes. The guide to setting your fees in 2007 sets out other services provided by [Denplan]: provision of a dedicated practice support team; access to regional and key client consultants; access to the Denplan patient team; contribution to the Denplan quality programme; receipt of the Update magazines; access to the Denplan’s risk management service; marketing support; and invitations to Denplan events (clinical, hospitality or networking) for some of which separate charges are made. (14) Also not mentioned in the Rules is a buying club available to members in which suppliers offer discounts on mainly, though not exclusively, dental products. The member’s details are also advertised on [Denplan’s] website, and the member has access to the members-only part of the website, which includes a forum. (15) Associated with the goodwill transfer service is the provision by [Denplan] of guidance to the buying and selling of goodwill. (16) The relationship between the dentist and the patient in a plan is governed by the Denplan Contract and the Care Agreement. There are different contracts for Denplan Care and Denplan Essentials. [Denplan] describes its role as being “to provide administrative services to support the contract between you and your dentist. This includes passing your payments on to your dentist on a regular basis.”
“The objectives of Denplan are: to encourage and facilitate the carrying out of private general dental practice; to promote among members the best standards of their profession and the provision by them of preventive dental care and dental treatment of the highest standard to the benefit of all their patients and to enhance generally the reputation and goodwill of Denplan and its members.”
“Subject to the payment of Denplan’s charges, in respect of contracts registered under a registration facility allocated to him or her, a member is entitled to receive the following services from Denplan: (a) maintenance of a database containing details of the member’s registered patients; (b) collection from registered patients on the member’s behalf of initial registration charges and capitation fees; (c) provision of regular monthly reports detailing registrations and capitation transactions carried out on the member’s behalf; (d) remittance of money held by Denplan due to the member; (e) giving of notices on the member’s behalf to registered patients concerning changes in capitation fees and other administrative matters arising; and (f) maintenance of insurance (on such terms as Denplan considers appropriate) for the benefit of his of her registered patients against the cost of emergency care and treatment for dental injury.”
“The concept of this service is to create a system that simplifies administration and allows dentists to spend more time with their patients and less time on paperwork.”
“36. There is a one-off charge to the dentist of£35 for the setting up and administration of the registration facility. Although the acquisition of a registration facility will usually indicate that, at some point, a dentist would have made a strong commitment to one of the three products mentioned [i.e.Denplan Care, Denplan Essentials or Plans for Children], there is still some work for the dentist to do in signing up a patient and in some cases no patients are signed up. … 37. In exchange for this registration fee, Denplan undertakes to provide the patient registration facility. This is the service of registering patients in a dentist’s name and administering contracts of dental care between the dentist and the patient. Denplan maintains a comprehensive database of all dentists’ patients and provides information from the list as and when requested by the dentists. Denplan also assists in recording the patient’s name, address, dental records and other necessary details in a database and keeping these up to date with amendments as and when they arise. … 39. Once a dentist member has paid for the establishment of a patient registration database, he/she can register patients. This, in turn, can lead to a dental payment plan to be managed by Denplan. There are three payment plans available … ”
“If patients are signed up to one of the payment plans provided by Denplan as described above, Denplan will, on behalf of dentists, handle the process of collecting the fees from patients and paying these fees on to the dentist. A typical fee for this service (and the amount used by way of example in correspondence with HMRC) is 71p per month.”
“Our finding of facts is that, even though the 2003 Rules tie the monthly fee to the money transfers, one must consider this in the context that patients cannot be registered unless the dentist is a member and has a registration facility. Where all three exist there is no reason to attribute to the membership fee facilities that are available only where there are plan patients. It is more realistic to attribute to the membership fee only those facilities that relate to members without plan patients, such as the use of the member-only section of the website and use of the trademark. We are unable to understand why a member should have a registration facility but no plan patients registered, particularly as the number in this category (214) exceeds the 50 who are likely to be in course of setting up patient plans. We suspect that they are likely to include some members who hoped to, but have failed to, persuade any patients to join a plan, and some retired dentists since the registration facility is for a one-off fee and would not terminate on retirement. Accordingly our finding of fact is that viewed realistically it is not the case that the monthly fee is solely the consideration for the money transfers. The monthly fee is consideration for all services provided to members with a registration facility and registered plan patients.”
“I do not understand it to be in controversy that once the input data are supplied by the appropriate means, the process thereafter is wholly automatic, and results in an actual transfer of money between accounts.”
“The court must recognise that it is for a supplier, whose supplies would otherwise be taxable, to establish that it comes within the exemption, so that if the court is left in doubt whether a fair interpretation of the words of the exemption covers the supplies in question, the claim to the exemption must be rejected. But the court is not required to reject a claim which does come within a fair interpretation of the words of the exemption because there is another, more restricted, meaning of the words which would exclude the supplies in question.”
“The task of the court is to give the exempting words a meaning which they can fairly and properly bear in the context in which they are used.”
“53. On this point, it must be noted first of all that a transfer is a transaction consisting of the execution of an order for the transfer of a sum of money from one bank account to another. It is characterised in particular by the fact that it involves a change in the legal and financial situation existing between the person giving the order and the recipient and between those parties and their respective banks and, in some cases, between the banks. Moreover, the transaction which produces this change is solely the transfer of funds between accounts, irrespective of its cause. Thus, a transfer being only a means of transmitting funds, the functional aspects are decisive for the purpose of determining whether a transaction constitutes a transfer for the purposes of the Sixth Directive. 54. In cases where the customer effects a transfer or causes a transfer to be effected without any action by the bank, the specific facts which constitute the transfer are carried out either by the data-handling centre and the customer or by the data-handling centre and a third party, the latter acting at the customer’s request, or by the data-handling centre acting alone pursuant to a standing order from the customer. 55. The contractual links between the bank and the customer do not diminish the role of the data-handling centre. It is from those links that the customer derives the right to have transactions effected, even if they are invoiced as services provided to the bank and also alter the bank’s financial situation. 56. Moreover, if point (3) of art 13B(d) of the Sixth Directive covered only the service which a financial institution provides to the end customer, only certain acts concerning transfer transactions could be exempt. Such an interpretation would restrict the exemption in a way which is not supported by the wording of the provision in question. That wording does not restrict the exemption to that relation and it is sufficiently broad to include services provided by operators other than banks to persons other than their end customers.”
“64. Given this difference of view, it must be noted first of all that the wording of point (3) of art 13B(d) of the Sixth Directive does not in principle preclude a transfer from being broken down into separate services which then constitute “transactions concerning transfers” within the meaning of that provision and which are invoiced by specifying the elements of those services. The invoicing is irrelevant for the application of the exemption in question, provided that the actions necessary for effecting the exempt transaction can be identified in relation to the other services. 65. However, since point (3) of art 13B(d) of the Sixth Directive must be interpreted strictly, the mere fact that a constituent element is essential for completing an exempt transaction does not warrant the conclusion that the service which that element represents is exempt. The interpretation put forward by SDC cannot therefore be accepted. 66. In order to be characterised as exempt transactions for the purposes of point (3) and (5) of art 13B, the services provided by a data-handling centre must, viewed broadly, form a distinct whole, fulfilling in effect the specific, essential functions of a service described in those two points. For “a transaction concerning transfers”, the services provided must therefore have the effect of transferring funds and entail changes in the legal and financial situation. A service exempt under the directive must be distinguished from a mere physical or technical supply, such as making a data-handling system available to a bank. In this regard, the national court must examine in particular the extent of the data-handling centre’s responsibility vis-a-vis the banks, in particular the question whether its responsibility is restricted to technical aspects or whether it extends to the specific, essential aspects of the transactions. … 68. In view of all foregoing considerations the reply to be given … must be that this provision is to be interpreted as meaning that transactions concerning transfers and payments include operations carried out by a data-handling centre if those operations are distinct in character and are specific to, and essential for, the exempt transactions.”
“FDR Ltd was a company which supplied credit card services to banks. Its clients were either “issuers” (banks who issued credit cards to cardholders), “acquirers” (banks who paid merchants, normally retailers, in exchange for vouchers accepted by those merchants in payments for goods or services), or banks who acted in both capacities. In a typical credit card transaction, not involving FDR, a cardholder would hand his credit card to the merchant who then recorded the transaction [either manually or electronically]. Before the transaction was finalised, the merchant could be required to obtain the issuer’s authorisation. The merchant would subsequently be paid by the acquirer, the acquirer would be paid by the issuer, and the issuer would be paid by the cardholder on presentation of a monthly account. Some banks “outsourced” their obligations in respect of such transactions to FDR. FDR maintained two accounts, the cardholder account and the merchant account. On being notified that a credit card transaction had occurred, FDR, after, if necessary, authorising the transaction, posted a credit to the merchant account and then made an entry on a magnetic tape which was supplied on a daily basis to BACS … instructing it to effect a credit in the merchant’s own bank account and to create a corresponding debit in the acquirer’s central accounts. FDR reconciled the accounts between issuers and acquirers on a daily basis by establishing the net position of each client bank and the net amount which needed to be transferred from or to that bank (the netting-off procedure). FDR made a payment out of its own funds to each client bank which was a net claimant and received (later the same day) a payment from each bank which was a net debtor. Those payments were made through the banking system using the CHAPS mechanism. FDR also posted a debit to the cardholder account (to which it also posted credit entries when the cardholder paid his or her monthly bill). If the cardholder had arranged to pay his bill by direct debit, FDR also provided for BACS to debit the cardholder’s ordinary bank account, and credit the issuer’s account, with the relevant sum.”
“37. The value of these statements (which have, according to counsel’s researches, never been doubted) is that they show that, if one leaves aside transfers in specie (of coin, goods or other property), a transfer of money means no more nor less than the entry of a credit in the payee’s account and the entry of a corresponding debit in the payor’s account. There may be – will be – problems in cases of error or fraud in the posting of entries to the accounts. But however those may fall to be resolved, there is no further, elusive, event by which the money is really transferred: no Platonic form, of which day-to-day transfers are only shadows. The pro and con entries constitute the transfer. There is nothing else. … 38. If this reasoning is right it is, I think, very significant for a sensible and intelligent understanding of SDC. It demonstrates that what the Sixth Directive imports by the term “transfer” inheres in the notion of a “change in the legal and financial situation” – an expression used in both paras 53 and 66 - where that is a reference to the effects of the corresponding credit and debit entries in the accounts of the paying and receiving parties.”
“42. On this aspect of the case, it is in my judgment of the first importance to recognise that BACS for its own part exercises no judgment or discretion whatever. Once the relevant tape is prepared (and that is admittedly done by FDR) and delivered to BACS, the process is, as I have said, automatic. Moreover the inevitable outcome is a redistribution of the rights and obligations of payor and payee – a “change in the legal and financial situation” – the very circumstances which in my judgment constitute a transfer of funds for the purposes of art 13B(d)(3). As far as I can see that result would only not be arrived at if the BACS hardware or software were to break down, or if (assuming this were possible) FDR were to countermand its instructions during the BACS payment cycle. In those circumstances BACS is in my judgment merely the agency by which FDR effects transfers, in the four situations I have identified. Any other conclusion would be contrary to the good sense of the general law. Qui facit per alium facit per se (he who does a thing through another does it himself). And I cannot in this see the least affront to the reasoning in SDC: quite the contrary: it is a conclusion which conforms to the letter and spirit of art 13B(d) as it was explained in that case.”
“37. Article 13(B)(d)(5) of the Sixth Directive does not define the meaning of “negotiation in securities” for the purposes of that provision. 38. Clearly, the words “including negotiation” are not intended to define the principal object of the exemption laid down in the provision, but to extend the scope of the exemption to negotiation. 39. It is not necessary to consider the precise meaning of the word “negotiation”, which also appears in other provisions of the Sixth Directive, in particular, art 13B(d)(1)-(4), in order to hold that, in the context of art 13B(d)(5), it refers to the activity of an intermediary who does not occupy the position of any party to a contract relating to a financial product, and whose activity amounts to something other than the provision of contractual services typically undertaken by the parties to such contracts. Negotiation is a service rendered to, and remunerated by a contractual party as a distinct act of mediation. It may consist, amongst other thing, in pointing out suitable opportunities for the conclusion of such a contract, making contact with another party or negotiating, in the name of and on behalf of a client, the detail of the payments to be made by either side. The purpose of negotiation is therefore to do all that is necessary in order for two parties to enter into a contract, without the negotiator having any interest of his own in the terms of the contract. 40. On the other hand, it is not negotiation where one of the parties entrusts to a sub-contractor some of the clerical formalities related to the contract, such as providing information to the other party and receiving and processing applications for subscription to the securities which form the subject-matter of the contract. In such a case, the sub-contractor occupies the same position as the party selling the financial product and is not therefore an intermediary who does not occupy the position of one of the parties to the contract, within the meaning of the provision in question.”
“The Vice-Chancellor pointed out that the effect of the supply by Bookit to the customer of services having the fourth of the components identified by the tribunal – the transmission of the card information, the security information and the card issuers’ authorisation codes to Girobank – was that the price of the ticket and the card handling fee was transferred from the customer (in the case of a debit card transaction), or from the card issuer (in the case of a credit card transaction), to Bookit’s account with Girobank. That is what clause 3.1.1 of the MSA [the Merchant Services Agreemententered into between Girobank, Odeon and Bookit] required Girobank to do on receipt of the card transaction data.”
“Applying these principles I would reject the claim of Bookit insofar as it is based on the second payment to which I have referred … The payment by Bookit to Odeon was the necessary consequence of the fact that it was the agent of Odeon for the purpose of selling the cinema tickets. But the same cannot be said of the first payment. As is emphasised in para 3.2 of the MSA that payment was made to Bookit for and on its own account. It was a payment for and on behalf of the Customer. It did alter the legal and financial situation. The card handling services provided by Bookit to the Customer were more than technical or electronic assistance but were the essential preliminaries to any remote payment by the Customer being effected. They were not rendered as a party to the contract between the Customer and Odeon, nor as the sub-contractor of either of them. They were separately remunerated by the card handling fee paid by the Customer. They constituted activities distinct from those of any other party.”
“45. It was because the fourth component of the service supplied by Bookit to the customer does have the effect that funds are transferred to Bookit’s account with Girobank – in accordance with the obligations of Girobank under clause 3.1.1 of the MSA – that the Vice-Chancellor reached the conclusion that the exemption for which art 13B(d)(3) provides was available in the present case. In my view he was correct to do so. 46. It was submitted on behalf of the Commissioners that the transfer of funds to the credit of Bookit’s account with Girobank was a matter of no importance to the customer; and, in particular, that the customer was unlikely to be aware of – and would probably be indifferent to – whatever arrangements or obligations might exist between Bookit and Girobank under the MSA. I accept that the machinery by which payment would be effected is unlikely to have been in the mind of the customer when he requested and accepted services from Bookit. But, as it seems to me, there can be no doubt that, in requesting and accepting Bookit’s services, the customer contemplated and intended that some payment would be made which would enable him, on his attendance at the cinema of his choice, to collect the tickets which he needed; and intended that Bookit would arrange for that. The services which Bookit supplied – as identified by the tribunal – did have the effect which the customer contemplated and intended that they would have. The fact that the customer was indifferent to the machinery by which that effect was achieved seems to me irrelevant. The relevant questions are (i) what services were supplied by Bookit to the customer, and (ii) did those services attract the exemption for which art 13B(d)(3) provides. As I have said, I am of the view that the answers which the Vice-Chancellor gave to those questions were correct.”
“Accordingly, just as in FDR sending the file to BACS effected the transfer, here sending the file containing the card details and the issuers’ authorisation codes to Girobank effected the transfer because Girobank was required to act on the information by crediting Bookit’s account.”
“Bookit therefore establishes that by passing the card information together with the card authorisation codes to Girobank, the acquirer bank, Bookit, an outsider to the banking system, made the transfer. Bookit’s role was somewhat similar to FDR’s.”
“Accordingly the authorities establish that an outsider to the banking system who gives an instruction to a party within the banking system, such as BACS, which is bound to carry it out automatically, is itself effecting the transfer and is making an exempt supply.”
“22. Mr Anderson contends that the facts of this appeal do not fit that conclusion. He says that payment is automatic only if the patient has not cancelled the direct debit with the patient’s bank, and if there are funds in the patient’s account. The position in Bookit was different because the authorisation code was binding. However, it seems from paragraph 19 above that in Bookit although payment was initially made it might be reversed. FDR is closer factually because FDR was initiating direct debits by BACS, but Mr Anderson contends that FDR’s position was different from [Denplan’s] because it was supplying its services to the banks, not to customers of the banks. 23. On the facts of this case [Denplan] initiated the BACS payment which resulted in receipt by [Denplan] on day 3 of the cycle. If payment is not made by the customer [Denplan] receives a report of unpaid amounts on day 5. Once the file is sent to BACS payment is automatic in the sense that BACS does not have any discretion about payment. Unlike Bookit, here there is not initial payment and then reversal if the customer’s bank does not pay. By the beginning of day 3 of a BACS payment cycle one knows whether the customer’s bank will pay and so [Denplan] either receives payment on day 3 or a report of amounts unpaid on day 5. 24. We do not consider that the position can be different depending on whether payment is initially made and then reversed, or if it is not made in the first place. The BACS cycle takes three days and the transaction is not complete until then. The essential point is that, leaving aside cases where something goes wrong, the action of [Denplan] in sending the file to BACS causes the payment to be made automatically from the patients’ banks to [Denplan’s] bank by day 3. In those cases where something goes wrong and there is no payment by the patient to [Denplan], no fee is charged by [Denplan] to the dentist, and so there is no supply for VAT, and this is something that can be ignored. 25. Does it make any difference, as Mr Anderson contends, that [Denplan] is initiating the transfer on behalf of the dentists, for whom it receives the money as agent, and is therefore providing a service to the dentists, rather than, as in FDR, to the banks? In SDC, as in FDR, the company was supplying a service to the banks which had the effect, as the result of the contractual position between the customer and his bank, of making a transfer that affected the legal and financial position of the bank’s customer. In Bookit the company was supplying services to the cardholder for which the cardholder paid an additional fee, so this is a case of supplies otherwise than to a bank. 26. We consider that [Denplan’s] making the supply to the bank’s customer, the dentist, strengthens the case for exemption rather than weakening it. The Danish Ministry’s argument in SDC at [52] was that the supply was to the bank and not to the end customer (“provided to the customer in the bank’s name,” which we understand to mean that the contractual relationship was with the bank only), about which the Court concluded at [57] that “an interpretation restricting application of the exemption provided for by point (3) of art 13B(d) to services provided directly to an end customer is unfounded.”
“21. In that regard, the Court has held that there is a single supply in particular in cases where one or more elements are to be regarded as constituting the principal supply whilst one or more elements are to be regarded, by contrast, as ancillary supplies which share the tax treatment of the principal supply … 22. The same is true where two or more elements or acts supplied by the taxable person to the customer, being a typical consumer, are so closely linked that they form, objectively, a single indivisible economic supply, which it would be artificial to split.”
“37. In this case we have found that the monthly fee paid by the dentist to [Denplan] is the consideration for all the supplies made by [Denplan]. Mr Peacock categorises this as predominantly a supply of payment handling services, and Mr Anderson as a supply of administrative services. It is possible for us to find that the principal supply is the taxable element, the exempt element or that it should be apportioned. The total supplies made by [Denplan] are: payment handling, making reports to the dentists of payments and non-payments; goodwill transfers; support in setting fees; Denplan product training; use of Denplan brand name and logos; advertising the member’s practice on [Denplan’s] website; access to the member-only section of the website which includes a forum; quality audits; complaints handling, and arbitration. We can put on one side those services that are provided to members and dentists with a registration facility but no plan patients, which are the use of the member-only section of the website and use of the trademark. Of the remainder, they break down into first, services that are indirectly connected to payment handling, such as reports of payments and non-payments, chasing up non-payments, and goodwill transfers (which are really effecting changes in the dentist to whom payments are made). Secondly, there are services that have no (or a more distant) relation to payments, such as recording changes of patients’ addresses, support in setting fees (which are entirely something for the dentist to decide), Denplan product training and advertising the member’s practice on [Denplan’s] website (both of which may lead to the sale of more plans), quality audits, complaints handling and arbitration. 38. Is this a single bundle of services when considered on a level of generality which corresponds with social and economic reality? We consider that [Denplan’s] services are not a single service but a number of services of which payment handling is the principal one. It involves large sums of money, and spreading payment to dentists into monthly payments is the reason for [Denplan’s] existence. Are some of the other services ancillary to payment handling? [They then quote from paragraph 30 of Card Protection Plan on the meaning of “ancillary”]. We consider that the supplies listed under “first” in the previous paragraph are subservient to payment handling. If payments are made (or not made) one needs a record of them, and if the circumstances change so that the payments needs to be made to a different dentist, assisting that change is subservient to making the payments. On the other hand, the supplies listed under “secondly” in the previous paragraph are not subservient to payment handling, they are not a means of better enjoying the payment handling service, and they do constitute an aim in themselves for the dentist. The dentist would regard such things as information that assists him in setting fees, complaints handling and arbitration as something desirable in their own right and unconnected with making transfers. Accordingly they cannot be classed as ancillary to payment handling. We consider that the monthly fee should be apportioned.”