‘Exemption under Group 7 of Schedule 9’
‘However if the employment business maintains the direction and control of its health professional staff to make a supply of medical care directly to a final consumer, then the employment business is providing medical services rather than merely a supply of staff. In these circumstances, the business is making an exempt supply of health services.’ (2) ‘A letter from HMRC VAT enquiries team to another taxpayer’ (HB/90-redacted): ‘Our internal guidance VATHLT2360 confirms that HMRC accepts that the exemption will apply, irrespective of the staffing issue, where a “nursing agency” supplies a registered nurse under Item 1(d), Group 7, Schedule 9 of VATA 1994, or an unregistered nursing auxiliary who is directly supervised by a registered nurse, or who are supplied to a hospital or similar institution, as described in Item 4, Group 7, Schedule 9 of VATA 1994, and where they perform services which are directly part of the care made to the patient.’
‘[5] … a letter from HMRC, dated14 January 2004 , addressed to Delta, which states that Delta is liable to account for VAT on the commission element because it is acting as agent rather than principal because the staff were not Delta employees. The same letter confirms that Delta’s supplies of nursing staff, but not support staff, would be treated as exempt if Delta acted as principal.’
‘Since the NAC is a concession I fully accept that the tribunal has no jurisdiction to consider whether or not it should be applied, and nothing in my decision was intended to imply the contrary.’
‘[32] I cannot accept that the14 January 2004 letter could give rise to a reasonable expectation in a reasonably prudent economic agent that a business operating as Delta operated would be regarded as supplying nursing staff as an agent between 2013-16, … The letter did clearly state that position as at the date that it was written, but HMRC published a range of materials over the subsequent years which contradicted, or were at least inconsistent with, the position adopted in the letter. A reasonably prudent trader in the position of Delta would have been aware long before 2013, if necessary through taking specialist advice (a) that HMRC no longer stood by the analysis in the14 January 2004 letter that Delta would only be a principal if it employed its nursing staff, and (b) that Delta did not fulfil the criteria adopted by HMRC as indicative of agent status …’ [42] … it was not unfair for HMRC to depart from the position stated in the14 January 2004 letter, and certainly not unfair to the required very high level [set out in R (Hely-Hutchison) v HMRC[2017] EWCA Civ 1075 ]. The short point is that the assessments under challenge covered periods which fell a minimum of nine years after the letter and four years after the first of a series of publications which made clear to the informed reader that the position stated in the letter regarding agent status was no longer regarded by HMRC as correct. …’
‘… the NAC cannot apply to the Claimants because they did not choose to apply it at the time that relevant services were supplied (but only relied upon it retrospectively, when it appreciated that HMRC was not proposing to require it to account for VAT on the basis that it had been supplying staff as a principal).’
‘The Claimants relied upon the treatment of GCL … in order to contend that it was a breach of EU law principle of equal treatment not to permit them to invoke the NAC retrospectively. The facts surrounding the treatment of CGL are sparse. However, … if HMRC did permit retrospective reliance upon the NAC, that was not a correct interpretation of what the concession permitted. The material point for the purposes of the principle of equal treatment is that the principle cannot be used to compel an authority which acts in error to promulgate and perpetuate that error by applying it to others (see, for example, Sub One Ltd v HMRC[2014] STC 2508 , per McCombe LJ at §90: “there is no EU law right in a taxpayer … to be treated in the same way as other taxpayers who secured an historic windfall due to a misapplication of law”).’
‘[39] … the NAC would be understood by the ordinarily sophisticated taxpayer as requiring a choice to be made in relation to each supply at the latest by the time the client is invoiced in respect of that supply. That is because the choice to exempt a supply requires positive action by the taxpayer. To “exempt” a supply means not to charge or account for VAT on it. The positive action required by the taxpayer is to exclude, rather than include, VAT when invoicing its client. The choice ‘to exempt’ a supply is therefore one that has necessarily to be made at the time of the supply.’
‘2. The Appellant no longer pursues the grounds of appeal based on legitimate expectation (in reliance on either HMRC’s representation that the Appellant was an agent or in reliance on the nursing agencies concession). 3. The Appellant maintains that its supplies were exempt under VATA 1994, Schedule 9, Group 7. 4. The Appellant also submits that the assessment against it was not raised to best judgment.’
‘21. The Appellant respectfully submits that the assessment on the Appellant (dated29 July 2016 and relating to period from 09/14 to 04/16) was not made to best judgment. 22. An assessment is not made to best judgment where HMRC have acted perversely: “… The circumstances in which the FTT can decide that the assessment was not raised to the best of the Commissioners’ judgment, and therefore should not have been made at all, are very limited, essentially being restricted to cases where the Commissioners have acted perversely or in bad faith. ....” (Mithras (Wine Bars) Limited v HMRC[2010] UKUT 115 (TCC) , §11). 23. The Appellant does not suggest that HMRC acted in bad faith. 24. In this case, the officer looked at the Appellant’s corporation tax returns and made a fundamental error in believing that a taxpayer had to “apply for an exemption” which, on the basis that the Appellant had not done that, meant that VAT was chargeable: “In response to the point made on page 2, paragraph 6 of the above-mentioned letter, I wish to clarify that I thought you had to apply for an exemption if you were making exempt supplies, but I now realise you do not have to. This would only apply to the taxpayers making zero rated supplies who would like to be exempt from registering for VAT.” 25. The Appellant submits that it was irrational for the officer to leap in and raise assessments based on such a serious failure to understand a basic VAT concept. That point is heightened given that HMRC were under no pressure to do so.’
‘The above matters … were always within the scope of instructions and perhaps within the reasonable response throughout. In the interest of justice, however, we would surmise that the previous legal representatives would offer their best efforts to provide the analysis required in the circumstances. … We do not believe that the Respondent would suffer any prejudice …’
‘[36] An application to amend will be refused if it is clear that the proposed amendment has no real prospect of success. The test to be applied is the same as that for summary judgment underCPR Part 24 . Thus the applicant has to have a case which is better than merely arguable. The court may reject an amendment seeking to raise a version of the facts of the case which in inherently implausible, self-contradictory or is not supported by contemporaneous documentation.’
‘… In most cases the merits of the appeal will have little to do with whether it is appropriate to grant an extension of time. Only in those cases where the court can see without much investigation that the grounds of appeal are either very strong or very weak will the merits have a significant part to play when it comes to balancing the various factors that have to be considered at stage 3 of the process. In most cases the court should decline to embark on an investigation of the merits and firmly discourage argument directed to them.’
‘[11] The principles established in Van Boeckel and Rahman 1 indicate that the FTT’s jurisdiction when considering whether an assessment was raised to the best of the commissioners’ judgment is akin to a supervisory, judicial review type jurisdiction. The FTT does not have a true appellate function in that it cannot set aside the assessment on the basis that it disagrees with the Commissioners’ decision to make the assessment. The circumstances in which the FTT can decide that the assessment was not raised to the best of the Commissioners’ judgment, and therefore should not have been made at all, are very limited, essentially being restricted to cases where the Commissioners have acted perversely or in bad faith. Cairnwath J in Rahman 1 indicated that the “kind of case is likely to be extremely rare” and that in the normal case “it should be assumed that the Commissioners have made an honest and genuine attempt to reach a fair assessment”: see page 835 of [Rahman 1] judgment.’
‘But the tribunal has a further function. In determining the appeal the tribunal may have evidence before it which makes it clear that although the assessment was perfectly proper on the information available to the Commissioners nonetheless it should be reduced to give effect to that further evidence, or even further argument based on the material originally before the Commissioners. This function has been clearly recognised in a number of cases, including Van Boeckel: see page 64 of the judgment.’
‘[16] The observations extracted from the decisions in Koca and Rahman 1 emphasise the point that in an appeal against the amount of an assessment, the Tribunal is not restricted to any kind of quasi-supervisory function which involved referring to the Commissioners’ judgment on quantum at the time the Commissioners made their assessment. The Tribunal’s function is truly appellate, in that it can consider further information or argument at the hearing of the appeal and reduce the amount of the assessment, thereby substituting its own view on quantum for that of the Commissioners.’