Isle of Wight NHS Trust v The Commissioners for HMRC [2025] UKFTT 1114 (TC)

[2025] UKFTT 01114 (TC)Case No TC09640
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 11 –13 June 2025Date Judgment date: 16 September 2025
Location: Taylor House, London
Appeal reference: TC/2021/03151
VALUE ADDED TAX:
Before
TRIBUNAL JUDGE AMANDA BROWN KCMS GILL HUNTER
Between
ISLE OF WIGHT NHS TRUSTAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentZizhen Yang of Counsel instructed by Ashurst LLP for AppellantJennifer Newstead Taylor, of Counsel instructed by the General Counsel and Solicitor to HM Revenue and Customs for RespondentsDECISION

Introduction

[1]This appeal concerns a decision (Decision)of HM Revenue and Customs (HMRC) issued to Isle of Wight NHS Trust (Appellant) dated 3 August 2021 that the supply of locum medical practitioners (Locums) is not a supply meeting the terms of the exemption provided under Item 5, Group 7, Schedule 9, Value Added Tax 1994 (VATA) (Item 5).[2]The case has a very fractious history. We need not relate that history, though the corporate animosity between the parties was an unhelpful theme that continued through the present hearing. Before us this manifested itself in the ongoing question as to whether we had sufficient evidence on which to determine the appeal and regarding HMRC’s reliance on a file of archived internal papers concerning the legislative history of what is now Item 5. We consider that these matters could, and probably should, have been resolved between the parties prior to the hearing.[3]This appeal is designated as a lead case. The Appellant’s representative’s letter, to which the Decision was a response, concerned 13 NHS Trusts or other recipients of the supplies of Locums. All the represented parties appealed the Decision as it concerned them individually. Seven further recipients of Locums also brought appeals against decisions reflecting the Decision (together Stayed Appeals). On 16 October 2023 the Tribunal endorsed directions finally agreed between the parties that:
“The Appeals listed in the Appendix to this Application shall be stayed until 60 days after the release of the decision of the First-tier Tribunal in the appeal of the Isle of Wight (TC/2021/03151). This stay shall, as regards any factual issue(s), be pursuant to Rule 5(3)(j) of the [Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (FTT Rules)] and, as regards the correct construction of [Item 5], which is a common issue of law in all the appeals, be pursuant to Rule 18 of the FTT Rules.”
[4]We are grateful to Counsel and those instructing them for their detailed preparation and presentation of this appeal including their engagement with the Tribunal in questions intended to ensure a thorough understanding of their case. We assure the parties that, in preparing this judgment, full account has been taken of the documents to which we were taken, skeleton arguments and oral submissions. With a view to ensuring a succinct judgment we have summarised their positions.

Preliminary/procedural applications

[5]We were required to determine four preliminary/procedural applications before we could begin to focus on the principal and technical issue in dispute.

Appellant’s standing in the appeal/supply issue

[6]The Appellant’s appeal was lodged on 30 August 2021. On 3 December 2021 HMRC applied for the appeal to be struck out pursuant to rule 8(2)(a) FTT Rules. In essence, by that application, HMRC contended that the letter of the 3 August 2021 was not intended to be and did not represent a decision meeting one of the descriptions specified in section 83(1) VATA.[7]The application was heard (together with similar applications made in connection with the Stayed Appeals) on 29 September 2022 by Judge Anne Scott. In her judgment, issued on 9 January 2023 [2023] UKFTT 00023, Judge Scott determined that, despite a lack of clarity concerning the scope of the substantive issue disputed by the Appellant, the matter before her was “simply what constitutes an appealable decision”. Judge Scott applied the prior Tribunal judgment in Mather v HMRC [2014] UKFTT 1062 and interpreted the judgment in HMRC v Earlsferry Thistle Golf Club [2014] UKUT 250 (TCC) to conclude that for there to be an appeal under section 83(1)(b) VATA what was required was a decision made by HMRC on the VAT chargeable on the supply of any particular goods or services. In that context, Judge Scott identified that there must be a sufficiently crystallised issue in dispute between the parties. An appealable decision need not identify a specific supply and did not need a specific amount of VAT to have been determined but, to be an appealable decision, it could not concern hypothetical supplies. Further, a party seeking to bring an appeal was required to have a real legal interest in the outcome of the appeal in order for the Tribunal to have jurisdiction to hear an appeal.[8]Judge Scott acknowledged that, as the recipient of the supply, the Appellant’s right to recover VAT which may have been overpaid on supplies of Locums arose as a matter of contract between the Appellant and its supplier; only the Appellant’s supplier having a right of recourse to HMRC for recovery of amounts considered to have been overpaid by way of VAT. However, she accepted that, unless and until the liability of the supplies had been determined, the Appellant had no effective remedy against its suppliers.[9]Having carefully analysed the terms on which the Appellant had sought a ruling and the detailed terms of HMRC’s response, Judge Scott determined that the letter of 3 August 2021 represented a decision as to the liability of supplies whose nature had been identified by reference to sufficiently specific information provided by the Appellants and thereby met the terms of section 83(1)(b). Judge Scott rejected the notion that, because HMRC did not intend to issue an appealable decision, there was no such decision.[10]On the question of the Appellant’s standing to bring the appeal, Ms Newstead Taylor, who also represented HMRC at that hearing, provided a limited concession that the Appellant had a financial interest in any decision regarding the liability of supplies made to it in connection with the provision of Locums. On the basis of that limited concession, and as the identified recipient of supplies of Locums, Judge Scott concluded that the Tribunal had jurisdiction to hear and determine the appeal.[11]No appeal was brought against that decision. We accept it as having determined that there was both an appealable decision issued by HMRC, and that the Appellant had the right to bring the appeal.[12]By her skeleton argument, Ms Newstead Taylor reinvigorated HMRC’s challenge concerning the Tribunal’s jurisdiction to hear the appeal. We were taken to the Upper Tribunal (UT)judgment in Mainpay Limited v HMRC [2021] UKUT 270 (TCC) (Mainpay UT). In that case the approach adopted in determining the factual aspects of the appeal was stated to be a “matter of contractual interpretation viewed in the light of the commercial and economic reality … [involving] a consideration of all the relevant facts and circumstances in which the supply took place”. HMRC challenge the adequacy of the Appellant’s disclosure and the ability of the Appellant to rely on the statements of witnesses not tendered for cross examination. In light of that challenge, they contend that the Appellant cannot prove a factual case that, in the period prior to April 2021, (when the supply liability ruling was requested) it received supplies on which it could be said it had incorrectly incurred VAT. They submit that the Appellant is required to prove every aspect establishing the receipt of particular supplies on which VAT had been incurred in order that we could then proceed to determine the case. Without an ability to prove its factual case HMRC contend that the Appellant’s appeal must fail and there is no need for us to determine the legal issue concerning liability.[13]Ms Yang’s position was that the question of standing had already been determined and that whilst the evidential picture may not be perfect, there was sufficient evidence on which we could be satisfied that the Appellant had received supplies of Locums on which VAT had been incurred in the period prior to August 2021 and on which we were therefore entitled to determine the liability for VAT purposes.[14]In determining how to proceed we applied the overriding objective to determine the fair approach in all of the circumstances of this appeal. We took account of the following matters:(1) HMRC had previously sought, unsuccessfully, to strike out the appeal in circumstances in which it was accepted (albeit by reference to what was recorded as a limited concession by HMRC) that the Appellant had a financial interest in the appeal.(2) HMRC had systematically and repeatedly sought further disclosure and made requests for further and better particulars of the Appellant’s factual case, none of which were ultimately granted by the Tribunal. The case management directions granted provided only for the usual directions for disclosure of documents and provision of witness statements.(3) That we consider the limited concession was plainly right. The Appellant’s request for a ruling was supported by a schedule of invoices which have now been disclosed and which relate to the provision of Locums. The invoices charged VAT which, in the hearing HMRC conceded, had been paid to them by the supplier.(4) This appeal was selected by the parties and approved by the Tribunal as a suitable lead case behind which 20 others are stayed for the purposes of determining the central and common legal issue identified and articulated simply as “the construction of [Item 5]”. To refuse to proceed to consider the common legal issue on the basis of an asserted inadequacy of evidence would represent an inappropriate delay in the determination of the correct interpretation of Item 5.(5) This appeal is already 4 years old.[15]Having considered these factors we communicated to the parties that we were unwilling to make any determination on the quality of the evidence in isolation and that we proposed to determine the central legal issue. We would then rule on the adequacy of the evidence. As to the evidence we would consider, we invited the Appellant to extract evidence of an individual supply of a Locum received from each of an “on framework” and an “off framework” supplier. Even on this, the parties appeared to struggle to work cooperatively. Eventually, the Appellant identified particular supplies and extracted the relevant documents thereon. HMRC continued to refuse to accept that the documents extracted represented evidence capable of establishing the nature of the supply received and thereby whether it was capable of meeting the terms of the exemption provided for in Item 5 whatever our interpretation of that provision.[16]We determined to proceed on the basis of the sample transactions identified by the Appellant in the documents which had been extracted. Subject to our review of them, we were satisfied that we should determine the correct interpretation of Item 5, assess the evidence as to what it demonstrated and then apply the correct interpretation to our factual findings.

Appellant’s witness statements

[17]The Appellant served witness statements on behalf of Jacqueline Humphries dated 9 August 2024 and Holly Smith dated 12 August 2024.[18]The date on which the appeal was listed for hearing was notified to the parties on 21 November 2024. The date was fixed according to the availability of the parties. However, on 9 May 2025 the Appellant applied for a postponement of the hearing. One of the reasons for the request was that, despite HMRC having indicated that they intended to cross examine the witnesses, neither witness would be available to attend the hearing and had withdrawn. The Appellants applied for the statements to stand as hearsay evidence with the Tribunal placing such weight on the evidence as was considered appropriate in accordance with our wide discretion to admit evidence under rule 15 FTT Rules. The statements were said to be contextual and exhibiting documents on which we were entitled to rely in reaching our decision.[19]HMRC objected to the reliance on the witness statements as hearsay evidence. They referred to the case management directions as requiring that each party seeking to rely on a witness statement was required to call that witness to be available for cross-examination by the other party unless that other party had notified that the witness was not required. HMRC had notified a requirement to make the witnesses available for cross-examination and as such, the Appellant should be precluded from relying on the witness statements at all. In the alternative, if the Appellant was entitled to rely on the witness statements no weight should be given to them. In this regard, HMRC relied on section 4(1) and (2) Civil Evidence Act 1995 which sets out the considerations relevant to weighing hearsay evidence. In particular, that reliance on the statements as hearsay was impermissible as neither statement was contemporaneous to the period prior to August 2021 and both statements were caveated, the witnesses confirming that their knowledge of specific issues was limited and derived from others (thereby constituting multiple hearsay). Further, deficiencies were identified in the witness statements and HMRC claimed that they would be prejudiced if any weight was placed on the statements.[20]We did not read the witness statements prior to hearing the submissions of the parties as to their admissibility. During the hearing we determined that the Appellant would not be entitled to rely on the witness statements whether as hearsay evidence or otherwise. We were satisfied that HMRC’s concerns were such that there would be material prejudice to HMRC if the evidence was admitted. Further, we were not satisfied as to the relevance of the statements in any event given the nature of the task before us. On the Appellant’s own submission the statements provided only context and introduced documents. We considered that context was largely irrelevant to the issues we must determine. This is so, not least of all, because the Appellant has no right of recourse for recovery of VAT incurred from HMRC. HMRC will have the right to challenge whether particular supplies were made, and VAT paid on them, as and when the supplier to the Appellant seeks to recover the VAT from HMRC by way of a section 80 VATA claim. We note that, for all periods up to the date on which HMRC gave their Decision, any claim for recovery of such VAT would now be out of time unless it has already been submitted.[21]We therefore proceed without consideration of the witness statements themselves.

Exhibits not on Appellant’s list of documents and other documents

[22]Each of the witness statements of Ms Humphries and Ms Smith referred to a pack of exhibits. Relying on paragraph 22 of the High Court judgment in Gestmin SGPS S.A v Credit Suisse (UK) Limited and another [2013] EWHC 3560, HMRC contend without the ability to cross examine on the documents introduced, the documents themselves should not be admitted.[23]We disagree. Whilst we accept that the terms of rule 27(2) FTT Rules provide that each party shall be required to produce and serve a list of the documents on which they intend to rely, the purpose of that rule is to ensure that the opposing party is given due notice of documents on which reliance is to be placed. Rules 5 and 15 FTT Rules give the Tribunal wide discretion in the governance of proceedings and the production of evidence. The witness statements exhibit certain documents which were included on the list of documents but also include documents not so listed. However, HMRC were given notice that such documents were to form part of these proceedings when the witness statements were served and have had months to consider them.[24]HMRC have not been impeded in the criticisms they have raised in respect of the unlisted exhibits. We were therefore provided with an extremely robust exposition of the asserted deficiencies in the documents fully enabling us to consider what weight we should give them. Therefore, and to the extent that the exhibited documents relate to the sample transactions identified by the Appellant, and on which this appeal therefore proceeded, we admit the documents.[25]We also determined to admit a limited number of further additional documents provided to us in a “clip” of the two sample supplies. The new documents were evidence of registration of the two Locums which were the subject of the specimen supplies and a purchase order which the Appellant contended completed the audit trail for the off-framework supply.

The forbidden part and Hansard extracts

[26]We were told that in December 2023, and in preparation for this case, someone (unnamed) discovered an historic policy file containing documents relating to the scope of Group 7 Schedule 9 VATA which included papers concerning the drafting and introduction of the Value Added Tax (Medical Goods and Services) Order 1979 (Order). The file included the following categories of documents:(1) correspondence between, and notes of meetings with, the British Medical Association Deputising Service (or their solicitors) and HM Customs and Excise (HMCE)in the period 1972 – 1979.(2) handwritten and typed internal notes between individuals who appeared to be members of HMCE’s policy advisory team and/or solicitors’ office prepared between 1972 – 1979 including drafts of the Order.[27]HMRC also sought to rely on extracts from Hansard dated 6 April 1973 and 15 March 1984, written answers to Parliament dated 27 June 1978, Fourteenth Report from the Select Committee dated 25 February 1979, and House of Commons Health Committee, Fifth Report of Session 2003-4 dated 19 July 2004 concerning “General Practitioners’ Deputising Services”. Also included was a letter to the Select Committee on Statutory Instruments dated 4 April 1979 and minutes of proceedings of the Select Committee on Statutory Instruments, Session 1978 – 1979 dated 4 April 1979 and Session 1978 – 1979 dated 4 April 1978.[28]None of these documents was supported by a witness statement, they were however included in HMRC’s list of documents.[29]HMRC claimed to be entitled to rely on the contents of this file and the Hansard extracts on three grounds:(1) They provide context or look at the nature of the mischief at which the legislation was aimed.(2) A more flexible approach to the admission of such documents is permitted where the statute to be construed implements the provisions of an EU Directive.(3) They may be admitted de bene esse (i.e. provisionally) pending a decision on admissibility.[30]We note that the Hansard extracts to which HMRC referred could not be admitted under the terms of Pepper v Hart [1993] AC 593 HL(E) (PvH). The 1973 extracts concern deputising services generally, they do not concern the Order and cannot therefore represent a statement of the meaning of Item 5 from a minister or promotor of the Order, irrespective of the clarity of the statements and/or whether or not the terms of Item 5 are ambiguous or obscure or lead to an absurdity. As regards the letter from Solicitor’s Office dated 4 April 1979 and the Minutes of the Select Committee on Statutory Instruments of the same date, there is no reference to Item 5 so they cannot therefore be relevant in any regard to its interpretation.[31]The Appellant was prepared to accept that, to the extent that the file contained material in the public domain, HMRC may be permitted to include it in the bundle, though further challenge was made to the extent to which it might be used in the interpretation of Item 5.[32]We admitted the material de bene esse, at least for the purposes of the hearing as we allowed HMRC to take us to the documents at some length in their attempt to demonstrate that they should be admitted and the Appellant, to a significantly lesser extent, referred us to them to demonstrate that they did not support HMRC’s case.[33]In their challenge to admissibility of the documents in the file, the Appellant referred to R v Secretary of State for the Environment, Transport and the regions, Ex party Spath Holme Ltd [2011] 2 AC 239 (Spath Holme) in which it was stated:
“… To the extent the extraneous material assists in identifying the purpose of the legislation, it is a useful tool. This is subject to an important caveat. External aids differ significantly from internal aids. Unlike internal aids, external aids are not found within the statute in which Parliament has expressed its intention in the words in question. The difference is of constitutional importance. Citizens with the assistance of their advisers, are intended to be able to understand Parliamentary enactments, so that they can regulate their conduct accordingly. They should be able to rely on what they read in the Act of Parliament. This gives rise to a tension between the need for legal certainty, which is one of the fundamental elements of the rule of law, and the need to give effect to the intention of Parliament, from whatever source that, objectively assessed, intention can be gleaned.”
[34]The Appellant also invites us to apply Bogdanic v Secretary of State for the Home Department [2014] EWHC 2872 (QB) (Bogdanic). That case concerned penalties imposed on vehicles passing through UK border control. The Secretary of State filed evidence providing information about the background to the relevant legislation and its policy intent. In refusing to admit the evidence Sales J stated (paragraph 13):
“… In construing a legislative instrument … it is a basic constitutional principle that the citizen or person subject to the relevant law should have the means of access to any material which is said to provide an aid to construction of that instrument. It is only material which is in the public domain and of clear potential relevance to the issue of interpretation of a legislative instrument which can be treated as having any bearing on the proper construction of that instrument: see Black-Clawson International Limited v Papierwerke Waldhof-Aschaffenburg AG [1975] AC 591 ….”
[35]Further support was said to be drawn from the Supreme Court judgment in In re Agricultural Sector (Wales) Bill [2014] UKSC 43 (Agriculture Wales). In that case the Attorney General had sought to rely on internal correspondence not referenced in Parliament concerning the scope of “agriculture”. The Supreme Court observed (at paragraph 39):
“in our view it would be wholly inconsistent with the transparent and open democratic process under which Parliament enacts legislation to take into account matters that have passed in private between two departments of the Executive … We therefore refused in the hearing of the reference to admit the correspondence. We refer to it no further.”
[36]HMRC contended that these authorities were not apposite in the present case.[37]Support for HMRC’s invitation to apply the mischief rule was said to be found in the Supreme Court judgment in Recovery of Medical Costs for Asbestos Diseases (Wales) Bill [2015] UKSC 3, in which the Supreme Court had confirmed that the context of a legislative measure may be determined, under a rule quite distinct from that in PvH, by examining background materials. In the context of adopting a purposive interpretation to EU derived UK legislation, it was contended, relying on the observations of Clarke J in Three Rivers District Council and others v Bank of England (No 2) [1996] All ER 363 that a “somewhat more flexible approach than that laid down in Pepper v Hart” should be adopted to the admissibility of explanations of the government.[38]In response to HMRC’s submissions in this regard the Appellant identified that the Supreme Court had released its judgment in the matter of Darwall and another v Dartmoor National Park Authority [2025] UKSC 20 (Darwall)on 21 May 2025. In that judgement the Supreme Court has now clarified that the only means of accessing the statements of promoters of a Bill presented to Parliament is through the strict application of the PvH rule:
“41. As for the alternative basis of admissibility for which the appellants contend, they cited Bennion, Bailey and Norbury on Statutory Interpretation, 8th ed (2020), section 24.12 in support of their submission. In fact, in that passage the authors express scepticism about whether reference to Hansard in this way is legitimate. The authors state: “As mentioned in Code [section] 24.3(purpose for which external aids may be used), where the aim is to resolve ambiguity it seems open to question whether the distinction between referring to legislative debates for the general background, or the mischief at which an Act is aimed, and referring to legislative debates as an aid to the construction of particular words is sustainable. It may also be queried whether it is consistent with the decision in Pepper v Hart itself.” 42. This scepticism appears to us to be justified. …” “As mentioned in Code [section] 24.3(purpose for which external aids may be used), where the aim is to resolve ambiguity it seems open to question whether the distinction between referring to legislative debates for the general background, or the mischief at which an Act is aimed, and referring to legislative debates as an aid to the construction of particular words is sustainable. It may also be queried whether it is consistent with the decision in Pepper v Hart itself.”
[39]We are satisfied, in light of the guidance now provided by the Supreme Court in Darwall, that there is no basis on which Parliamentary statements are admissible save through the PvH gateway. On that basis, it would be astonishing if there were a more relaxed gateway for the admission of non-parliamentary, departmental or private material. As clearly articulated in Spath Holme, Bogdanic, and Agriculture Wales it is only right that the meaning of statutory instruments can be discerned from publicly available material.[40]Should that be our conclusion, HMRC sought to contend that the correspondence between HMRC and the BMA Deputising Service had been sufficiently widely distributed to represent publicly available information. We reject that submission. The correspondence was private to the parties to it. HMRC would not have been entitled to share the correspondence with any other taxpayers and whilst the BMA Deputising Service may have chosen, as some of the correspondence indicates, to advise others of its contents that, in our view, falls well short of the material being public information and certainly not material of which it could possibly have been argued that the Appellant would have been aware.[41]We therefore refuse to admit any of the material contained within the file or the Hansard extracts other than the Explanatory Note and the Explanatory Memorandum.[42]We are comforted that our approach is consistent with that taken by Lord Hodge (with whom Lords Briggs and Stephens and Lady Rose agreed) in R (O) v Secretary of State for the Home Department [2022] UKSC 3 (R(O)) in which it is stated (at paragraph 30):
“external aids to interpretation therefore must play a secondary role. Explanatory notes, prepared under the authority of Parliament, may cast light on the meaning of particular statutory provisions. Other sources, such as Law Commission reports, reports of Royal Commissions and advisory committees, and Government White Papers may disclose the background to a statute and assist the court to identify not only the mischief which it addresses but also the purpose of the legislation, thereby assisting a purposive interpretation of a particular statutory provision. The context disclosed by such materials is relevant to assist the court to ascertain the meaning of the statute, whether or not there is ambiguity and uncertainty, and indeed may reveal ambiguity or uncertainty … But none of these external aids displace the meaning conveyed by the words of a statute that, after consideration of that context, are clear and unambiguous and do not produce absurdity …”
[43]Lord Hodge went on to exclude as inadmissible Parliamentary statements that did not meet the PvH test.[44]We note that the list of supporting material referenced is limited to publicly available parliamentary material. This is despite Lady Arden, in her concurring judgment, indicating that recourse to pre-legislative material could, in appropriate circumstances, assist the judge to better perform his or her role in finding the intention of Parliament in respect of a particular enactment. The absence of any reference to Lady Arden’s judgment is also to be noted in the recent adoption of paragraph 30 of R(O) in Re For Women of Scotland v Scottish Ministers [2025] SCUK 16 (see paragraphs 8 – 14). Relevant law VAT legislation

Relevant law

[45]Article 132(1)(c) Principal VAT Directive exempts from VAT “the provision of medical care in the exercise of the medical and paramedical professions as defined by the Member State concerned”.[46]Section 31 VATA exempts the supply of goods and services which are specified in Schedule 9. Relevant to this appeal, Group 7 of Schedule 9 specifies that the following services shall be exempt:(1) Item 1 – the supply of services consisting of the provision of medical care by a person registered or enrolled in … (a) the register of medical practitioners … (Item 1).(2) Item 5 – the provision of a deputy for a person registered in the register of medical practitioners.[47]Note 2 to Group 7 provides, inter alia, that paragraph (a) of Item 1 includes supplies of services made by a person who is not registered in the register of medical practitioners where the services are wholly performed by a person who is so registered.[48]What are now Item 5 and Note 2 were substantively enacted under the provisions of the Order with effect from 2 April 1979. The explanatory note (EN) to the order provided:
“The Order extends also the exemption under Group 7 of the Exemption Schedule to include the provision of a deputising service for doctors, and in addition exempts the supply of medical services by persons whose names appear in the statutory register and rolls referred to in the group where such professional services are supplied through a third-party – usually a limited company employing the persons concerned.”
[49]In addition to the EN, an Explanatory Memorandum was prepared at the request of the Select Committee on Statutory Instruments. It stated:
“… new item 5, deals with supplies by organisations providing “deputising services”
. A general practitioner is responsible for his patients at all times and these organisations arrange for a doctor’s telephone calls to be answered when he is not available and for the deputy to be provided when necessary. It is desired that such provision of “deputising services” to a doctor should be exempt and the new item 5 exempts such supply.”

Healthcare legislation

[50]We were referred to the following statutory provisions:(1) National Health Service (General Medical and Pharmaceutical Services) Regulations 1962 (NHSGMPS Regs 1962). So far as relevant, Schedule 1, paragraph 8 “Deputies, assistants and partners” provides, at 8(1), that all treatment provided by a General Practitioner (GP) was to be provided personally except where prevented by reason of other professional duties, temporary absence from home or other reasonable cause. Where so prevented, paragraph 8(3)(a) specified that the GP was required to make all necessary arrangements for securing the treatment of his patients through the provision of a deputy from an identified list of practitioners including (i) a partner of the GP to be relieved, (ii) a person who was “included in the same medical list” as the GP relieved, (iii) a deputy for no reward or (iv) a deputising service. Paragraph 8(3)(e) provided a definition of deputising service (any person who, or body which, undertakes to provide as part of his or its business a deputy or deputies for practitioners). Further provisions were laid out concerning the provision of deputies. The deputy was entitled to see patients at times and places other than those arranged by the practitioner for whom the deputy was acting subject to the convenience of the patient (paragraph 8(7)) and was required to sign prescriptions in their own name and in the name of the person for whom they were deputising (paragraph 8(8)). Paragraphs 8(11) and (12) cause the practitioner for whom the deputy is appointed to be responsible for all acts and omissions of the deputy except where the deputy is also registered as a GP.(2) National Health Service (General Medical and Pharmaceutical Services) Regulations 1972 (NHSGMPS Regs 1972) Schedule 1: (a) Paragraph 1 defines a “deputising service” as “any person or body carrying on business which consists of, or includes, providing a deputy or deputies for doctors for periods which normally do not exceed 48 consecutive hours.” (b) Paragraph 16 provides that a doctor is required to give treatment personally save where reasonable steps are taken to ensure continuity of treatment through the provision of “another doctor acting as deputy”. (c) Paragraph 17 ensures that the doctor is responsible for all acts and omissions of any doctor acting as his deputy, inter alia, where the deputy is acting on his behalf save where the deputy is acting as deputy to another doctor included on the same medical list as the doctor on behalf of whom he is acting.

The issues

[51]We must determine:(1) The correct interpretation of Item 5.(2) Whether the Appellant has established, on the facts, that it has received services which should properly have been treated as exempt under Item 5.[52]To determine these issues, we were addressed generally regarding our approach to interpretation, specifically on the correct interpretation of Item 5 and on the evidence available to us in light of our conclusions on the procedural issues set out above.[53]The parties have an agreed position regarding the effect of Brexit in this appeal as set out in the Appellant’s skeleton argument:
“23. VATA 1994 has effect in relation to this appeal in the same way that it had effect immediately prior to IP completion day: section 2(1) of the European Union (Withdrawal) Act 2018 (“EUWA 2018”). 24. The amendments made to EUWA 2018 by the Retained EU Law (Revocation and Reform) Act 2023 (“REULA 2023”) and the savings in respect of VAT in section 28 of the Finance Act 2024 (“FA 2024”) have no application to events that occurred before the end of 2023: section 22(5) REULA 2023. Section 28 FA 2024 applies as regards events occurring after 2023. 25. The principle of the supremacy of EU law continues to apply in this appeal, so far as relevant to the interpretation, disapplication or quashing of law made before IP completion day (which includes all the domestic legislation relevant in this appeal): section 5(2) EU(W)A 2018, pre-REULA amendment and section 28 FA 2024 savings (as regards pre-2024 events); section 28(4) and (6)(b) FA 2024 and section 5(2) EUWA 2018 (as regards post-2023 events). Thus, the principle of conforming construction remains. 26. CJEU judgments made on or before 11 pm on 31 December 2020 are binding on this Tribunal. CJEU judgments made after that date are not binding, but the UK courts are free to have regard to them so far as they are relevant to the matter before the court: section 6 EUWA 2018.”
Approach to the interpretation of Item 5 Appellant’s submissions

Approach to the interpretation of Item 5

[54]The Appellant’s case is simply put: the supply of a Locum falls squarely within the terms of Item 5 as it is the “provision of a deputy for a person in the register of medical practitioners”. There is no complexity to the interpretation of Item 5 which plainly provides for what is exempt.[55]The starting point for the Appellant’s case is the FTT judgment in Rapid Sequence Limited v HMRC [2014] UKFTT 432 (TC) (Rapid). That case concerned precisely the same issue as in this appeal. The appeal was brought by a Locum provider. HMRC had determined that in order to benefit from the exemption under Item 5 the provider needed to make supplies of medical care whereas a Locum provider was a supplier of staff to a customer making exempt supplies of medical care. As such the Locum provider was not supplying medical care.[56]Having considered the domestic and EU case law, the Tribunal made certain observations as to the approach it was required to adopt when interpreting Item 5; we summarise those pertinent to the Appellant’s case as follows:(1) As Group 7 implements Article 132(1)(b) – (e) PVD it is to be interpreted so far as possible to be consistent with the provisions of the PVD.(2) Article 132(1)(c) PVD only permits exemptions for the provision of medical care.(3) Item 1 exempts the direct supply of services which consist of the provision of medical care whereas Item 5 exempts the provision of a deputy rather than the direct provision of the deputy’s services.(4) Applying the Upper Tribunal decision in Moher v HMRC [2012] STC 1356 the supply of staff, even staff on the relevant medical registers, where such staff are under the control of the party to whom they are assigned, does not qualify for exemption under Item 1 (or 2).(5) When a national law provision is inconsistent with principles of the PVD it must be construed so far as possible to be consistent with Article 132(1) and this may involve a substantial departure from the language used though not from the fundamental or cardinal features of the legislation.(6) The principle of fiscal neutrality applies when interpreting exemptions.[57]The Tribunal considered the evidence before it as to the nature of Rapid Sequence’s services and concluded:
“ 44. … we have no doubt that the business of Rapid Sequence, in the manner in which we have found it operates, consists of the provision of deputies for registered medical practitioners, whether that provision amounts to the provision of medical care or the provision of staff in the manner of an employment agency. The activity of arranging, as a principal, the placement of doctors seeking locum positions with NHS Trusts who Rapid Sequence have engaged themselves as principal, in the manner described in paragraphs 32 to 38 above, clearly falls within the plain meaning of Item 5. 45. Were Item 5 purely domestic legislation not enacted in order to meet one of the UK’s obligations under an EU Directive we would have no hesitation in determining the appeal in favour of Rapid Sequence. As Mr Hayes submits, Item 5 is written in plain English and lends itself to no other interpretation when construed in isolation. It is in clear contrast to the wording of Items 1(a) and 4 which refer to the direct supply of services of medical care; it is clear that those items relate to the direct supplies of medical services, such as by an NHS Trust who employs the doctor concerned, either under an employment contract or a contract for services, whereas on its face Item 5 goes further and extends the exemption to the provision of the person who supplies the medical services. 46. Without that extension it is hard to see why Item 5 would be necessary; the provision of the services of the deputising doctor, assuming he was a registered medical practitioner, would be covered by Item 1(a). It is also the fact, as we have observed, that Item 5 does not restrict the services provided by the deputy to those constituting medical care, as Item 1(a) does.”
[58]The Tribunal went on to consider whether the provision of the Locums by Rapid Sequence represented the provision of medical care and, applying the same reasoning as had been applied in Moher concluded that Rapid Sequence was not providing medical care. It concluded that it was possible to construe Item 5 consistently only with the provision of medical care by inserting words to that effect. The Tribunal observed that doing so meant that Item 5 was unnecessary because such services would also meet the terms of Item 1(a) but considered that a matter for Parliament.[59]The Appellant contends that the Tribunal in Rapid was correct on its plain interpretation of the terms of Item 5 and incorrect to consider that it was capable of a conforming construction.[60]The Appellant supports the plain reading of Item 5 in Rapid as adopting the approach required by the House of Lords in Spath Holme as it:
“… is an exercise which requires the court to identify the meaning borne by the words in question in the particular context. The task of the court is often said to be to ascertain the intention of Parliament expressed in the language under consideration. This is correct and may be helpful, so long as it is remembered that the “intention of Parliament” is an objective concept, not subjective, the phrase is a shorthand reference to the intention which the court reasonably imputes to Parliament in respect of the language used. It is not the subjective intention of the Minister or other persons who promoted the legislation. Nor is it the subjective intention of the draughtsman, or of the individual members or even of a majority of individual members of either House. ... As Lord Reid said in Black-ClawsonInternational Ltd v Papierwerke Waldhof-Aschaffenburg AG [1975] AC 591, 613: “We often say that we are looking for the intention of Parliament but that is not quite accurate. We are seeking the meaning of the words which Parliament used.”
In identifying the meaning of the words used, the courts employ accepted principles of interpretation as useful guides. For instance, an appropriate starting point is that language is to be taken to bear its ordinary meaning in the general context of the statute. … … in Fothergill v Monarch Airlines Ltd [1981] AC 251, 279-80:
“The source to which Parliament must have intended the citizen to refer is the language of the Act itself. These are the words which Parliament has itself approved as accurately expressing its intentions. If the meaning of those words is clear and unambiguous and does not lead to a result that is manifestly absurd or unreasonable, it would be a confidence trick by Parliament and destructive of all legal certainty if the private citizen could not rely upon the meaning but was required to search through all that had happened before and in the course of the legislative process in order to see whether there was anything to be found from which it could be inferred that Parliament’s real intention had not been actually expressed by the actual words that Parliament had adopted to communicate it to those affected by the legislation.” “The source to which Parliament must have intended the citizen to refer is the language of the Act itself. These are the words which Parliament has itself approved as accurately expressing its intentions. If the meaning of those words is clear and unambiguous and does not lead to a result that is manifestly absurd or unreasonable, it would be a confidence trick by Parliament and destructive of all legal certainty if the private citizen could not rely upon the meaning but was required to search through all that had happened before and in the course of the legislative process in order to see whether there was anything to be found from which it could be inferred that Parliament’s real intention had not been actually expressed by the actual words that Parliament had adopted to communicate it to those affected by the legislation.”
[61]Whilst acknowledging that the House of Lords went on in Spath Holme to consider the relevance of the “mischief rule” i.e. the identification of “the mischief and defect for which the common-law did not provide” the Appellant contended that the mischief rule had moved on considerably since Spath Holme. It was submitted that as an “external aid” to construction (i.e. external to the Act itself) the mischief rule, alongside other external aids were of little utility where the language of the statute is clear and lends itself only to one interpretation.[62]We were taken by the Appellant to the following authorities concerning the principle of conforming construction:(1) Swift v Robertson [2014] UKSC 50 an agreed judgment of the court in which it was acknowledged and accepted that provisions of domestic law transposing obligations imposed on the UK under the terms of a Directive must be construed “so far as possible” in light of the wording and purpose of the Directive. The court also approved the previous recitation of Sir Andrew Morritt in the Court of Appeal in Vodafone 2 v HMRC [[2009] EWCA Civ 446] setting out the six principles and principal limitation on conforming construction, namely that conforming construction: (a) is not constrained by conventional rules of construction; (b) does not require ambiguity in the legislative language; (c) is not an exercise in semantics or linguistics; (d) permits departure from the strict and literal application of the words used by the legislature; (e) permits the implication of words necessary to comply with EU obligations; and (f) the precise form of the words to be implied does not matter; but (g) the meaning should go with the grain of the legislation and be compatible with the underlying thrust of the legislation being construed.(2) Belgische Staat v L BV C-243/23 We note that although a 2024 and post Brexit judgment the relevant paragraph adopts precisely the language used by the court in earlier judgements all predating exit including Smith v Meade and others C-122/17. – the principal of conforming interpretation is limited by general principles of law and cannot serve as the basis for an interpretation of national law that is contra legem (against the law).[63]Put another way the Appellant contends that to interpret Item 5 as requiring the provision of medical care is contra legem.[64]The contra legem principle is explained by the Court of Appeal in Ampleaward Ltd v HMRC [2021] EWCA Civ 1459 (Ampleaward). The case concerned the interpretation of section 18(3) VATA which, on its terms, provided that a supply of goods within a bonded warehouse was treated as made outside the UK and therefore outside the charge to duty and VAT. Section 18(3) had the effect of removing a supply from the charge to duty whether or not the warehouse was physically in the UK. By the time the case reached the Court of Appeal it was accepted that the provisions of section 18(3), as drafted, did not conform to, and provided a broader exemption than, the provisions of the PVD which they sought to implement. The Court confirmed that position (see paragraphs 54 and 77).[65]The issue for determination by the Court of Appeal was therefore whether the domestic legislation could be “read down” so as to conform with the PVD. The Court acknowledged its duty to apply a conforming interpretation so far as such interpretation was possible. The Court reviewed the case law concerning conforming interpretation and noted at paragraphs 86 – 93 the limits to such an interpretive tool. In particular, that as a matter of EU law a directive addressed to a member state does not create enforceable rights between citizens; a directive imposes no obligations on citizens and may not be relied upon by the state as against the citizen. This carries the consequence that the state cannot take advantage of its own failure to comply with community law as against a citizen even under the guise of conforming interpretation. As such (and by reference to the judgement of the CJEU in Criminal proceedings against Arcaro C-168/95 (paragraph 39 – 40) the Court considered:
“39. … That rule of interpretation cannot, … be applied to undertake an actual redrafting of the provisions of national law. That would be tantamount to introducing the direct effect of provisions of a directive imposing obligations on individuals by the back door and contrary to Article 189 of the Treaty. 40. In other words, if the wording of the national rule allows of several interpretations, the national court must apply, from amongst the various interpretations, the one which will bring the provision of national law into harmony with Community law. If on the other hand the wording of the law leaves no room for interpretation because for example the law clearly says A, the rule of interpretation cannot be used contrary to the wording of the law so as to say B, even though B (but not A) is in accordance with Community law.”
[66]The Court of Appeal adopted the explanation of contra legem provided by Advocate General Bot in Dansk Industri v Estate of Rasmussen C-441/14 (se paragraph 95):
“The Latin expression “contra legem” literally means “against the law”
. A contra legem interpretation must, to my mind, be understood as being an interpretation that contradicts the very wording of the national provision at issue. In other words, a national court is confronted by the obstacle of contra legem interpretation when the clear, unequivocal wording of the provision of national law appears to be irreconcilable with the wording of a Directive. The Court has acknowledged that contra legem interpretation represents a limit on the obligation of consistent interpretation, since it cannot require national courts to exercise their interpretive competence to such a point that they substitute for a legislative authority.”[67]When considering whether a conforming interpretation of section 18(3) VATA was possible, the Court reiterated that as conforming interpretation was a principle of “interpretation” a court was not entitled to cross the boundary to amending legislation enacted by Parliament particularly where there may have been several ways in which the legislation could have been made compliant, but which involve policy choices the court was ill-equipped to make. In the context of section 18(3) VATA the Court considered that it was not possible to apply an interpretation which did not have the effect of reading the provision as “B” when it said “A”. The UK had incorrectly widened the permissible scope of the exemption and conforming interpretation did not allow the error to be corrected.[68]The threshold between conforming interpretation and contra legem has also recently been considered by the Upper Tribunal in the matter of The Trustees of Panico Panayu Accumulation and Maintenance Settlements Numbers 1 to 4 and Redevco Properties UK Limited v HMRC [2024] UKUT 319 (TCC). The case concerned the “exit tax” that arises on a deemed disposal when the trustees of a settlement or a company ceased to be resident in the UK for the purposes of taxation and whether the relevant statutory provisions constituted an impermissible restriction on freedom of establishment and free movement of capital.[69]At paragraph 83, the Upper Tribunal sets out the observation of Lord Nicholls in Re S [2002] AC 291 on the boundary between interpretation and legislative amendment in which he states:
“40. … This is not a novel problem. If anything, the problem is more acute today than in past times. Nowadays courts are more “liberal” in the interpretation of all manner of documents. The greater the latitude with which courts construe documents, the less readily defined is the boundary. What one person regards as sensible, if robust, interpretation, another regards as impermissibly creative. For present purposes it is sufficient to say that a meaning which departs substantially from a fundamental feature of an Act of Parliament is likely to have crossed the boundary between interpretation and amendment.”
[70]In that context, the Appellant contends that the language of Item 5 plainly and clearly provides exemption for the provision of an individual registered in the register of medical practitioners, the deputy, who will perform the duties for, and in place of, another person registered in the register of medical practitioners. That is interpretation “A”. To seek to interpret Item 5 as applying to the provision of medical care through a deputising service is not permissible on the wording adopted by Parliament and represents an impermissible interpretation “B”.[71]That this position is clear was emphasised by the conclusion in Rapid that the interpretation adopted as conforming interpretation carried the consequence that supplies exempted under Item 5 were also, and simultaneously, exempted under Item 1, an anomaly or absurdity which rendered conforming interpretation inappropriate.[72]If there were any doubt, which the Appellant contends there is not, that Item 5 was intended to represent an additional head of exemption, it is said to be clear from the EN, that those laying the Order, and thereby those approving it by negative resolution, considered Item 5, together with note 2 which was introduced at the same time, to both represent “extensions” to the pre-existing exemption. The Appellant contends that there is no greater analysis of the EN required than its reference to extending the exemption. The interpretation advanced by HMRC and that adopted by the Tribunal in Rapid does not extend the exemption, it repeats it.[73]Further, the Appellant contends that HMRC seek to impermissibly construe the EN to impute a meaning which is different to the wording actually adopted in the statutory provision. The exemption applies to the “provision of a deputy”, the Order could have been drafted such that the extension applied to a “deputising service” providing a statutory definition and/or explicitly or implicitly importing the meaning of such term from the legislative infrastructure through which the personal obligation of a general practitioner to provide medical care could be deputised (see Schedule 1 paragraph 16 NHSGMPSR 1972). The Appellant points out however, that even if the definition of a deputising service under NHSGMPSR 1972 (see Schedule 1 paragraph 1(b)) were imported it would not support HMRC’s case in the present appeal because a “deputising service” references a provider and not the service provided.[74]Should the mischief rule be relevant in this appeal, the Appellant submits that it must be apparent from the stated desire to extend the exemption that it was considered that the existing exemption did not adequately provide for either indirect provision of medical care (thus requiring note 2) or the provision of a deputy through which medical care was then provided (thus requiring Item 5).[75]Responding to HMRC’s alternative limit on the application of Item 5, namely that Item 5 is limited to the provision of a deputy for a GP (and not a hospital doctor), the Appellant makes 2 contentions.(1) Firstly, that to seek to subset those registered in the register of medical practitioners to those registered as general practitioners creates an unjustified and unjustifiable difference in treatment between deputies, all of whom are registered as medical practitioners and who deputise in the provision of medical care. The Appellant contends that this is so because the requirement to provide 24/7 medical care applies equally to GP practices and to hospitals (as the law stood in 1979 compare sections 3, 11 and 12 National Health Service Act 1946 (NHSA)(as applicable following the National Health Service Reorganisation Act 1973) concerning hospital care and section 33 of NHSA concerning general medical services). To have justified such a difference in treatment, with the associated implication for the cost of medical care, the Appellant submits very clear statutory language demarcating the type of deputy would have been required.(2) Secondly, that the supply made by a deputising service of GPs to practices in order to facilitate the provision of out of hours cover represents a supply of staff in precisely the same manner as was determined by the Court of Appeal in Mainpay. If the provision of staff, as distinct from the provision of medical care, does not meet the terms of Article 132(1)(c) PVD that is so whether the provision of staff is by way of a deputising service or through the provision of Locums generally. HMRC are not entitled to limit the scope of plainly worded, unambiguous but accepted as ultra vires domestic legislation, by way of a conforming interpretation because the provision cannot conform and still apply to a deputising service. To do so is to breach the principle of contra legem.[76]No assistance is said to be derived from the terms of HMRC’s guidance published at the time of the Order or since. As confirmed by the Court of Appeal in Leeds City Council v HMRC [2015] EWCA Civ 1293 (paragraph 4) published guidance is not law and represents “no more than HMRC’s interpretation of the law” which may be wrong.[77]The Appellant challenges HMRC’s further argument that “the provision of a deputy” requires the deputy to be deputising for a named and identifiable individual on the register of medical practitioners. The Appellant contends that such interpretation is not supported by the language adopted and would lead to absurd results. For example, a deputy deputising for a named individual on short-term sick leave would apparently be covered by the exemption but, if that same deputy continues to be provided following the resignation of the individual previously on short-term sick leave, the supply of the deputy would become taxable at the point of resignation. However, the provider of the deputy may have no knowledge as to the underlying circumstances in which the recipient receives the deputy, such that assessing the correct liability of the supply would be impossible and breach the principles of legal certainty.

HMRC’s submissions

[78]HMRC opened their submission by noting that, factually, this appeal is indistinguishable from the facts considered in Mainpay. As such, there can be no question that the supplies fall outside the provisions of Item 1 We note that HMRC did not “find” the file of policy materials when litigating Mainpay. They explained this was because it concerned Item 5 and Mainpay concerned Item 1. . There is a supply of staff and not a supply of medical care. In light of that position, HMRC contend that reliance on Item 5 is of no assistance to the Appellant because interpreting Item 5 so as to conform with the provisions of Article 132 of the PVD limits the scope of Item 5 to the provision of medical care.[79]It is HMRC’s case that the scope of Item 5 is narrow. It exempts the supply of GP deputising services provided by a deputy.[80]HMRC rely on the guidance provided by the Supreme Court in the cases of R(O) and R (oao PACCAR Inc and others v Competition Appeal Tribunal and others [2023] UKSC 28 (PACCAR) as framing the approach to be adopted by us in interpreting Item 5. They contend that, where there are opposing constructions, then the correct legal meaning of the language chosen by Parliament is to be derived from the application of the interpretive criteriato both the act and other relevant admissible material. Where the results of the application of those interpretive criteria point in different directions then it is the role of the Tribunal to weigh in the balance the opposing constructions and determine which it prefers.[81]The following interpretive criteria were identified by HMRC as relevant in this appeal:(1) Purposive construction - relying on paragraphs 41 and 188 of PACCAR and its confirmation of paragraph 188 in R (Quintavalle) v Secretary of State for Health [2003] 2 AC 687 HMRC submit that a literal interpretation of an act may frustrate Parliament’s intent, especially when it focuses too narrowly on the wording of the provision without addressing the problem that provision intended to address. The role of the Tribunal is to act as “informed interpreters” examining not just the words of the statute but also its preamble, historical context, and related legislation.(2) Historical context and mischief rule – HMRC rely on the mischief rule as established in Heydon’s Case (1584) 3 Co Rep 7A i.e. that we must consider the common-law position before the making of the order, the mischief and defect for which the common law did not provide, the remedy adopted to address that mischief and the true reason for the remedy. They invite us to look at the historical context and background to the taxation of GP deputising services in order to understand the mischief at which the Order was addressed.(3) The Barras Principle - a presumption that terms used in legislation carry their established legal meaning. Here the terms “deputy” and “deputising service” were used in earlier NHS regulations, specifically the NHSGMPSR 1962 and 1972. These terms refer to out of hours GP cover provided by deputising services. HMRC contend that Item 5 uses these terms in the same sense as used in the earlier NHS regulations and should therefore be interpreted consistently with that wider use.(4) Use of admissible external aids - HMRC rely on and invite us to determine this appeal using the EN and Memorandum to the Order, together with official statements and contemporaneous legal commentary, HMRC guidance and the internal file of material which we have considered at paragraphs 26 to 44 above. They contend that these materials provide relevant context from which we are able to discern the Parliamentary intent of Item 5.(5) Conforming construction – applying the Marleasing principle, as a former member of the EU, the principle of conforming construction or interpretation must be applied such that we are required to interpret Item 5 “as far as is possible” in light of the wording and the purpose of article 132 of the PVD in order to achieve the result pursued by the PVD and thereby comply with the UK requirements arising under Article 189 of the Treaty. HMRC contend that the scope for conforming construction is wide and muscular including the implication of words into domestic statutes ensuring that they comply with the EU law and subject only to a restriction that the conforming interpretation should “go with the grain of the legislation”, be compatible with the underlying thrust of the legislation/consistent with the fundamental or cardinal features of the legislation ensuring that the interpretation adopted does not cross the line and amount to the judiciary making legislation.[82]When considering the application of the principles of conforming construction and/or purposive construction HMRC identify that the CJEU has articulated that:(1) The objective of Article 132(1)(c) PVD is to reduce the cost of healthcare (see for example paragraph 29 Ambulanter Pflegedienst Kugler GmbH v Finanzamt für Körperschaften I in Berlin (C-141/100) (Kugler)).(2) Two conditions need to be met to come within Article 132(1)(c): “medical services must be involved and they must be supplied by persons who possess the necessary professional qualifications” (Kugler paragraph 27).(3) Article 132(1)(c) PVD does not exempt every activity performed in the public interest or all those increasing the cost of healthcare (see d’Ambrumenil and another v HMCE C-307/01 [2005] STC 650 (d’Ambrumenil)paragraph 54).(4) The concept of the provision of medical care does not extend to include medical interventions carried out for a purpose other than that of diagnosing, treating and, insofar as possible, curing diseases or health disorders (see Kugler paragraph 38 and d’Ambrumenil paragraph 57).[83]Applying these principles HMRC submit:(1) Group 7 Schedule 9 VATA implements the obligations of the UK under Articles 132(1)(b) – (e).(2) Applying the principle of conforming interpretation we are required to interpret Group 7 Schedule 9 VATA “as far as possible, in the light of the wording and purpose of the directive”.(3) Article 132(1)(c) PVD provides for “the provision of medical care in the exercise of the medical and paramedical professions as defined by the member state concerned”.(4) Exemptions are independent concepts of community law which are required to be interpreted strictly, but not restrictively (see Mainpay paragraph 61).(5) To be construed consistently with the provisions of Article 132(1)(c) PVD Items 1 – 5 must all be interpreted as limited to the provision of medical care.(6) To the extent that the language adopted by Parliament permits an interpretation which is wider than the provision of medical care, Item 5 must be interpreted in a more restricted way to avoid a non-confirming interpretation, where necessary interpreting the provision with additional imputed wording.(7) When the historical context and permissible aids to interpretation are considered, it is plain that Item 5 was implemented to apply only to the provision of medical care through a deputy for a GP providing out of hours cover where the individual and identified GP was otherwise required to provide the medical care personally.(8) Applying the Barras principle we are entitled to look to the regulation and requirements for GP deputising arrangements as provided for under the NHSGMPSR 1972 to understand the limited scope of Item 5 as described in the EN to the Order.(9) If Item 5 is construed so as to be capable of including a supply of staff, it is not compatible with the terms of the directive and such an interpretation should be avoided unless to do so goes against the grain of the legislation.(10) There is nothing against the grain of the legislation which would preclude an interpretation of Item 5 so as to read “the provision of a deputising service consisting of the provision of medical care for a general practitioner registered in the register of medical practitioners”.(11) Such interpretation simply represents the application of the muscular approach or strained interpretation expressly permitted to ensure, so far as possible, UK legislation is interpreted to achieve the UK’s EU obligations.[84]In HMRC’s amended statement of case they posit an alternative argument as follows:
“Should the Tribunal not accept the Respondents’ contentions above that Item 5 applies solely to Deputising Services for GPs, the Respondents argue, in the alternative, that Item 5, in referring to the provision of a ‘deputy’, can only apply to the supply of a locum doctor to provide cover for the responsibilities of a named individual on the register of medical practitioners, when that named individual is absent from work. It cannot apply, as the Appellant contends, to a situation where a locum is supplied to cover an unfilled vacancy or to provide additional capacity in a particular department or specialism. Even if (which is not accepted) Item 5 is capable of applying to a supply of staff, “the provision of a deputy for a person registered in the register of medical practitioners” can only apply to a situation where a locum is provided as a deputy to cover the responsibilities of a single, named, registered doctor (for example, in a situation where that named doctor is away from work due to leave or sickness absence).”
[85]The argument was not referenced in HMRC’s skeleton argument and not pursued in oral submission save as articulated in paragraph 83(7) above.

Discussion

[86]We must determine how Item 5 is to be construed. As a reminder, Item 5 exempts: “the provision of a deputy for a person registered in the register of medical practitioners”; at the time of the enactment of the Order, it also included medical practitioners with limited registration.

Ordinary meaning

[87]Applying the ordinary meaning of the language, Item 5 exempts the supply (provision) of a person appointed to represent or act on behalf of another (deputy) where that other is a person registered in the register of medical practitioners. On a purely linguistic analysis of the words chosen by Parliament, Item 5 exempts the supply of a person of a defined type and not a supply of the services which that person is appointed to undertake. It is not limited to the provision of a deputy for a general practitioner when providing out of hours cover because the language used provides no such limitation.[88]We therefore agree entirely with the Tribunal in Rapid that, on its ordinary meaning, Item 5 exempts the supply of registered medical practitioners in any field of medicine so long as the role performed by the individual so supplied is one that requires it to be performed by a registered medical practitioner.[89]That conclusion, in light of Mainpay, indicates that Item 5 is ultra vires the provisions of the Sixth Directive and the PVD as it exempts a supply of staff and not the supply of medical care.

Statutory and historical context

[90]We must then ask ourselves whether that linguistic interpretation is at odds with the statutory context and its history. In 1973 when VAT replaced purchase tax on the UK’s accession to the Treaty of Rome, Article 10 of the Second VAT Directive (67/228/EEC) provided that member states may, subject to consultation with the Commission, determine exemptions considered necessary. Item 1 to Group 7 Schedule 5 Finance Act 1972 provided for the exemption of “the supply of services and, in connection with it, supply of goods, by a person registered or involved in… the register of medical practitioners or the register of temporarily registered medical practitioners.” Exemption was also provided for the supplies of services and connected goods by other medical professionals including nurses, dentists etc. Under item 4, the provision of care or medical or surgical treatment and connected goods supplied in any hospital and other institutions was also exempted.[91]The Sixth VAT Directive was adopted on 17 May 1977. It introduced a more comprehensive framework providing for a uniform basis of exemption across the EU. Article 13A provided for exemptions for certain activities in the public interest. These exemptions included (b) hospital and medical care and closely related activities, (c) the provision of medical care in the exercise of the medical and paramedical professions as defined by the member state, (d) supplies of human organs, blood, and milk, and (e) services supplied by dental technicians in their professional capacity and dental prostheses supplied by dentists and dental technicians.[92]No amendment was made to the provisions of Group 7 Schedule 5 Finance Act 1972 until the Order was enacted with effect from 2 April 1979.[93]As set out above, Item 5 and what is now Note 2 were enacted by the Order together with a revision to the language of Item 1(a) (the exemption for those temporarily registered as medical practitioners being replaced by one for those with limited registration). The EN is clear that the Order “extends” exemption under Group 7 to “include” the provision of a deputising service for doctors and additionally extends the exemption where medical services are supplied through a third party.[94]HMRC invite us to conclude that the reference to “a deputising service for doctors” in the EN, limits the language adopted by Item 5 itself to the provision of deputies engaged in the form of a deputising service for out of hours GP cover. The Appellant contends that such an approach is impermissible as doing so requires us to interpret the Explanatory Note rather than Item 5 itself.[95]We reject HMRC’s submission in this regard. It is uncontroversial that explanatory notes may be used as an aid to statutory interpretation. PACCAR confirms that explanatory notes play a “secondary role”, that they may “inform the assessment of the overall purpose of the legislation and may also provide assistance to resolve any specific ambiguity in the words used in the provision in that legislation” (see paragraph 42). It is at least implicit therefore, that there needs to be some ambiguity in the legislation before it is necessary to resort to the relevant explanatory notes. Further, as confirmed by the Court of Appeal in R (oao McConnell) v Registrar General for England and Wales [2020] EWCA Civ 559, if there is an inconsistency between the terms of the explanatory note and the language adopted in the legislation, the notes are incapable of altering the true interpretation of the statutory provision (see paragraph 37). Finally, the Court of Appeal has clearly stated in R (oao Kaitey) v Secretary of State for the Home Department [2021] EWCA Civ 1875 that, when undertaking the exercise of statutory interpretation, the courts (and tribunals) should “resist attempts to elevate the Notes to a status where they supplant the language of the legislation itself. This is not least because, as the [explanatory notes] themselves state, they are prepared by the Government in order to assist the reader in understanding the Act but do not form part of the Act and have not been endorsed by Parliament.”[96]In our view the EN explains that it was necessary to extend the exemption otherwise provided for under Item 1 to include the provision of a deputising service for out of hours GPs. In that context, it may have been the intention of the drafter of the note to wholly or partially import that concept as defined in the NHSGMPSR when preparing the EN. However, the language adopted by Parliament was not that which exempted “a deputising service” (whether that was a provider as per NHSGMPSR or the services provided by such a provider). The language is the provision of a deputy and even under NHSGMPSR a deputy is a wider concept than a deputising service (see paragraph 16 Schedule 1 NHSGMPSR 1972 by way of example).[97]We consider that had Parliament intended to exempt from VAT only a GP out of hours deputising service and not the provision of a deputy for a registered medical practitioner on the General Medical Council’s (GMC) register generally, it would have used language that made it clear that was its intention. But it did not; the much broader exemption was legislated for, one which exempted the provision of a deputy thereby including, but not limited to, a deputising service; where the deputy was “for” a registered medical practitioner and as such included, but was not limited to, general practitioners.[98]We consider our view to be supported by the terms of National Health Circular E.C.N. 415: concerning General Medical Practitioners: Deputising Services which appears to set out to explain the NHSGMPSR 1962. It makes plain that the amendments made by NHSGMPSR 1962 did not alter the pre-existing arrangements for out of hours cover provided by partners, assistants, and locums (i.e. those arrangements covered in Schedule 1 paragraphs 8(3)(a)(i) – (iv)). Deputising services were and continued to be a subset of deputy.[99]We take essentially the same view of the Explanatory Memorandum.[100]We therefore conclude that there is nothing in the legislative or historical context of the Order which indicates that we should apply anything other than an interpretation based on the ordinary meaning of the language adopted as exempting the supply of any person registered on the register of medical practitioners who then performs the duties of the role of a registered medical practitioner.

Mischief rule

[101]We have some difficulty in applying the mischief rule. It has its genus in Heydon’s Case. Its purpose is to look at the identified defect in the common law which necessitated a legislative remedy.[102]The Executive of the Government has no power to collect tax save by reference to the express terms of statute; there was thus no common law defect that required a statutory remedy. However, and by reference to the EN and Explanatory Memorandum, we can be satisfied that, at least as regards the provisions of deputies through a deputising service, it was felt necessary to enact a statutory provision bringing them within the scope of the exemption but using statutory language which was not so limited.[103]We consider that in doing so a rational, reasonable and informed legislature must have concluded that the provision of a deputy did not come within the terms of the other Items within Group 7 even when interpreted with the benefit of what is now Note 2. That the UK Parliament is presumed to be a rational, reasonable, and informed legislature that does not legislate in vain is confirmed in in R (Ahmed) v Secretary of State for the Home Department [2019] EWCA Civ 1070 at paragraph 15 (approving Bennion Section 11.3: Presumption of ideal, rational legislature).[104]There is no public record explaining the basis on which, in 1979, HMRC concluded that deputising services were not included within Item 1. We can now discern that the provision of a deputy by a deputising service was properly excluded from Item 1 because a deputising service is a supply of staff rather than a supply of medical care (see Mainpay at paragraphs 57 and 69) and as such, if those supplies were to benefit from exemption, Item 5 was needed.

Barras principle

[105]We can deal with the Barras principle shortly. Item 5 refers to the provision of a deputy and not to the provision of a deputising service. There is therefore no basis for presuming that the meaning of “deputising service” in the NHSGMPSRs should be imputed when interpreting Item 5. As set out above we consider Parliament’s choice of “deputy” and “registered in the register for medical practitioners” rather than “deputising service”, and “included in the same medical list as the practitioner who is so included”, marks a policy driven legislative choice not to restrict Item 5 to out of hours GP deputising services. Conforming interpretation.[106]The principle of conforming interpretation requires that we recognise the UK’s EU obligation to implement the EU VAT Directives and thereby that we must, “as far as possible, in light of the wording and purpose of the directive” interpret Item 5 in accordance with the provisions of Article 132(1)(c) (Marleasing SA v La Comercial Internacional de Alimentación SA (Case C-106/89) paragraph 8). In doing so we must “examine the whole of the relevant legislation” and we are “not confined to construing the existing words of the legislation” (see Test Claimants in the FII Group Litigation v HMRC [2016] EWCA Civ 1180, [2017] paragraph 104) i.e. we are entitled to adopt a strained interpretation, reading down or in words to achieve a conforming construction (HMRC vIDT Card Services Ireland Limited [2006] EWCA Civ 29).[107]These wide interpretive powers have been summarised by the Upper Tribunal in Banks v HMRC [2020] UKUT 101 (TCC) (Banks)at paragraph 65(i) – (vii):
“(i) The obligation on UK courts to construe domestic legislation consistently with EU law obligations is both broad and far-reaching; (ii) It is not constrained by the normal domestic rules of statutory interpretation; (iii) It does not require ambiguity in the legislation being interpreted; (iv) It is not an exercise in semantics or linguistics; (v) It permits departure from the strict and literal application of the words used by Parliament; (vi) It permits the implication of words necessary to comply with EU law; (vii) The precise form of the words to be implied does not matter; …”
[108]The breadth of the interpretive tool and the scope of its limitations are now stable law, and we can turn to any number of authorities that confirm the approach we are required to take in addition to those referenced above:(1) Vodafone IIv HMRC [2009] EWCA Civ 446 (paragraph 37)(2) Wilkinson v Churchill Insurance Co Ltd [2012] EWCA Civ 1166 (paragraph 50)(3) (1) The Trustees of the Panico Panayi Accumulation and Maintenance Settlements Numbers 1 to 4 v, (2) Redevco Properties UK 1 Limited v HMRC [2024] UKUT 31924 (TCC) (paragraphs 58 – 9, 128 – 9, 140)(4) HMRC v The Applicants / Appellants in the Post Prudential Closure Notice Applications / Appeals Group Litigation (“Taxpayers”) [2025] EWCA Civ 166 (paragraphs 57 – 60)[109]However, it is not the case that the power is unrestricted or limitless. The judiciary does not have a breadth of interpretative power which permits us to step into the shoes of the legislature particularly where the legislative language was adopted to enact a policy choice of the executive.[110]The restrictions are summarised in Banks, as follows:
“(viii) the interpretation adopted should ‘go with the grain of the legislation’ and be compatible with the underlying thrust of the legislation in issue; (ix) an interpretation cannot be adopted which is inconsistent with a fundamental or cardinal feature of the UK legislation (as that would be amendment rather than interpretation); (x) the interpretation adopted cannot require the court to make a decision which it is not equipped to make nor lead to important practical repercussions which the court cannot evaluate.”
[111]Alternatively put, the restrictions preclude an interpretation which is contra legem but, as we read and interpret the various cases to which we were referred by both parties, the term “contra legem” substantively, and perhaps collectively, joins the restrictions identified in paragraph 110 above.[112]The Upper Tribunal recently adopted the position, in HMRC v Yorkshire Agricultural Society [2025] UKUT 4 (TCC) (Yorkshire AS)(at paragraphs 105 – 110), that the limits on conforming interpretation are themselves to be restrictively applied so as not to frustrate the possibility of conforming construction. However, this was in the context of legislation imposing what the Tribunal found to be an impermissible additional restriction, limiting the full scope of the exemption as provided for under the PVD, rather than with a view to limiting the scope of domestic provisions drafted more widely than a directive obligation.[113]In our view, the critical case we must apply is Ampleaward. That case draws the line between permissible conforming interpretation and impermissible legislative amendment as founded on the availability of different interpretations of the words used. As stated by the Court of Appeal “if the wording of the national rule allows of several interpretations, the national court must apply, from amongst the various interpretations, the one which will bring the provision of national law into harmony with Community law”. If the language leaves no room for interpretation, is clear and/or unequivocal, even if ultra vires the terms of the directive it purports to implement, conforming interpretation will not be permissible; particularly where the conforming interpretation advocated aims to limit the scope of the domestic statute to bring it in line with the authorising EU provisions.[114]We consider that the “provision of a deputy” i.e. someone who acts on behalf of another or in a designated role of another, cannot represent the provision of medical care. The recipient organisation is making the supply of medical care with the deputy acting as the resource by which the medical care is provided. That is not a service meeting the terms of any other provision of Group 7, particularly not Item 1. It is not the provision of medical care, either directly or indirectly. That is so irrespective of the terms of Article 132(1)(c) PVD and the purpose of exempting the provision of medical care.[115]For the reasons we have set out in our analysis under the other interpretive approaches, we consider that Parliament’s intent was to exempt supplies not otherwise exempted under Group 7 and where the provision of medical care was facilitated through the provision of deputies, temporary workers or locums provided by an employing third party which does not make supplies of medical care.[116]We therefore consider that the thrust, grain or intent of article 3(c) of the Order, as interpreted with the EN and otherwise in the context of Group 7 and its history, was explicitly to provide an exemption for GP out of hours deputising services because it was considered that the services did not meet the terms of Item 1 (as interpreted pursuant to what is now note 2) but using language which was deliberately wider than a deputising service (as interpreted through the lens of the NHSGMPSR).[117]It is our view that to limit the language used by Parliament by imputing any of the proposed formulations posited by HMRC is against the grain and contra legem. It would undermine a policy decision to exempt the provision of deputies for all branches of medical practitioners by legal/natural persons whose supplies of services did not otherwise meet the terms of Item 1 (construed with what is now note 2). As the Appellant contended, we are not being invited to construe words with a range of potential interpretations in a particular way. We are, instead, being asked to interpret words bearing only one meaning as something entirely different.[118]Further, and by reference to the analysis in Ampleaward, we consider that the construction we are invited to adopt represents an impermissible attempt by HMRC to narrow legislation which was drafted in terms wider than the permissible EU exemption. Even on HMRC’s interpretation (i.e. applying only to deputising services) in light of Mainpay and by reference to the provisions of NHSGMPSR, Item 5 applies to a supply of staff. As such we are invited to limit the extent to which Item 5 is non-conforming rather than to apply an interpretation which conforms.[119]Had we been prepared to adopt the interpretations urged upon us, as noted in Rapid,such interpretation would render Item 5 nugatory. The provision of medical care by any individual on the register of medical practitioners is and was already exempted under Item 1. Item 5 cannot reasonably be a subset of Item 1. The provisions were designed to provide discrete and accretive heads of exemption.[120]In this regard therefore we respectfully disagree with the conclusion of the Tribunal in Rapid that a conforming construction is possible. In doing so we note that the Tribunal in that case does not appear to have had the benefit of the analysis with which we were presented. As a matter of judicial comity we are not obliged to follow a decision of competent jurisdiction where we consider it to be wrong; accordingly we do not follow the decision in Rapid.[121]We conclude that there is no conforming interpretation open to us.

HMRC’s alternative arguments

[122]We have already dealt with HMRC’s contention that even if Item 5 applies to the provision of a deputy and not to a deputising service that it should be limited to the provision of a deputy for a GP. The GMC holds a register within which medical practitioners may be identified as GPs, specialists or simply registered generally. The legislation adopted the widest definition of the register. In contrast, the NHSGMPSR refers to practitioners on the medical list within the GMC register for general practitioners. We consider that to have been a plain legislative choice also available to Parliament when enacting the Order which was not adopted. As such there is nothing to limit the application of Item 5 to GPs.[123]Concerning the further alternative that a deputy must be provided for a named and identifiable individual i.e. only for an employee in post but unable to perform their duties and not temporary cover for a vacant post. We cannot see any sensible basis to apply that interpretation which fits within a scheme of self-assessed taxation where the supplier needs to determine the liability of the supply it makes and account to HMRC for VAT on the supply. Such an interpretation would render the scope of the exemption absurdly unworkable. The deputy must be “for a” registered medical practitioner. Whilst we accept that “a” might connote an identified individual registered medical practitioner we consider it more consistent with the language of the provision that it connote an identified post requiring a registered medical practitioner to perform it.[124]Item 5 provides no mechanism for communication by the Appellant to the supplier whether the post to be filled is a vacant post because of the temporary absence of a returning employee or in consequence of the post being vacant, or a change from the former to the latter. A supplier is therefore entitled to expect certainty in the application of the tax. Pursuant to the contracts they enter a supplier will be able to identify that they are providing a member of staff in order that the staff so provided is under the direction of the recipient in a situation in which the individual will provide services which require them to be a registered medical practitioner. Such a supply is, in our view, properly exempted under Item 5 whatever the circumstances giving rise to the vacancy in the post. That interpretation provides the necessary certainty which is to be expected of tax legislation (whether at an EU or domestic level).[125]We therefore reject both of HMRC’s alternative positions.

Sample transactions

[126]The parties did not appear to dispute that the Appellant employs the services of Locums in its operation of hospitals and other healthcare facilities providing medical care. The question for us is to determine the basis on which it does so and to apply the provisions of Item 5 as we have interpreted them to the facts as we find them. In the absence of any admitted witness evidence our fact finding is limited to establishing what the documents prove on the balance of probabilities.[127]We were provided with a “clip” of documents and associated schedule from which we are invited to determine the facts of these identified supplies.

On framework

[128]The first pack of documents concerns what the Appellant contends is the “on-framework” provision of Dr BK by Holt Doctors Limited (HDL)who worked as a consultant psychiatrist providing covid cover for the period 28/06/2021 to 01/07/2021.[129]The first document in this pack was a copy of a document headed “Appendix A (Master Vendor) Call-off Terms and Conditions for the Provision of Services” (MVA).It was signed by both HDL and the Appellant; the latest signature being on 20 February 2020 and with an effective commencement date of 20 February 2020. The recitals acknowledge that HealthTrust Europe (HTE)provides procurement services to the Appellant on a call off basis with a series of suppliers identified and introduced to the Appellant by HTE, including HDL. Under the MVA a contract is formed when the Appellant completes an order form and submits it to the supplier subject to the provisions of the schedules to the agreement. Schedule 1 (Key Provisions) specifies an initial period of 2 years’ (extendable by another 2) contract pursuant to the provisions of the Framework Agreement.[130]Clause 30 of Schedule 1 provides:
“[HDL] … Shall provide [the Appellant] with Temporary Workers who meet [the Appellant’s] professional standards, minimum qualifications and other requirements for the roles …”
[131]Although not in the clip, a copy of Schedule 4 to an unsigned version of what appears to be the same form of MVA (and included on the Appellant’s list of documents and to which we therefore feel entitled to refer) defines Temporary Worker as an individual supplied by the supplier for hire on a temporary Assignment (defined as the supply of a temporary worker as part of the provision of the services). Temporary Workers are recognised as agency workers for the purposes of the Agency Worker Regulations 2010.[132]Pursuant to Clause 42 the Appellant is required to provide reasonable supervision, direction, and control of the Locums to ensure patient safety.[133]The high-level process for filling the Appellant’s need for Temporary Workers is set out in Schedule 1 and by reference to a “Specification” and the detailed terms of other schedules to the MVA.[134]The general terms and conditions to the MVA were specified in Schedule 2 by reference to a link. We were not provided with the relevant Schedule 2. The Appellant’s list of documents included a copy of Schedule 2 for a period prior to that covered by the sample agreement, and a copy of Schedule 2 for a subsequent period was embedded into one of the witness exhibits. The Appellant referred only to and relied upon clause 9.4 of Schedule 2, the VAT clause, which provided that the price agreed for the supplies under the contract was calculated exclusive of any VAT due. The Appellant relied on the copies of Schedule 2 for periods before and after the date of the supply of Dr BK and submitted that the doctor was supplied on a VAT exclusive basis.[135]The second document was a purchase order dated 11 December 2020, order number 2821181833 from HDL to the Appellant, in respect of “call off order to add additional line to the 2820958144 agency medics 2020/21” to the value of £3,200,000.[136]There was then an invoice number 190721 issued on 19 July 2021 in respect of Purchase Order number 2821181833 locum work 05 - 11/07/2021, value excluding VAT £73,035.02, VAT £14,607, total invoice value £87,642.02. The detail for the invoice was provided in a schedule which included a line in respect of Dr BK who worked 28/06/2021 to 01/07/2021 providing covid cover for 39½ hours as a consultant at a rate of £128.64 per hour. The purchase order number on the schedule does not match that provided on the invoice.[137]We were also provided with a screenshot showing invoice payment details. The payment details reference PO number 282118183, invoice number 190721, invoice date 19 July 2021, invoice amount £87,642.02 and evidence of a BACS payment cheque run name: RIFBACS 0908211 from an identified bank number in the sum of £87,642.02. The payment is shown as made on 9 August 2021.[138]The final document is evidence of Dr BK’s registration with the GMC as a doctor on the specialist register for general psychiatry.

Off framework

[139]The second pack of documents concerned what the Appellant claimed were supplies made off framework made by Resuscitate Medical Services Limited (RMSL) of Dr SDR for the period 13/03/2020 to 17/04/2020.[140]We were provided with the “SoEPS Terms and Conditions for the Provisions of Temporary Agency Workers” (RMSL Contract). The document provides that it was to take effect from “Monday 14th December” [but no specified year] between the Appellant and RMSL concerning medical locums. It was not signed or dated by either party to it.[141]Schedule 6 sets out the contracting parties’ respective obligations pursuant to which RMSL accepted responsibility for payment of wages and associated employment taxation. Pursuant to that schedule the worker obligations are specified in a job description and person specification. As regards Dr SDR that was for a speciality doctor in emergency medicine.[142]Dr SDR was provided by RMSL to fill that role as noted on purchase order number 282109139 dated 3 April 2020, for work undertaken in the period 13/03/2020 to 17/04/2020 to the value cap of £34,000.[143]A VAT invoice number 1509 was raised by RMSL on 17 April 2020 for 46 hours work (as recorded on an accompanying timesheet signed by Dr SDR) undertaken by Dr SDR from 14 – 17 April 2020 in respect of purchase order 282109139 totalling £4,758.24, VAT of £951.65 totalling £5,709.89.[144]A screen shot was provided showing a payment from a specified bank account of the sum of £5,709.89 in respect of PO number 282109139, cheque run name RIFBACS1406201 made on 14 May 2020.[145]As for Dr BK, we were provided with a copy of Dr SDR’s registration as licenced to practice by the GMC. They are neither on the GP register nor one of the specialist registers.

HMRC’s challenges to the documents

[146]HMRC levelled many challenges to the documents. They started by inviting us to note the importance of probative documents as explained by the Court of Appeal in Mainpay:
“61 … (iii) … The analysis of what is being supplied depends, in any given case, on economic realities of the transaction, that being a “fundamental criterion” for the application of the common system of VAT …; The contracts are the most useful starting point in that exercise but not necessarily the endpoint; …”
[147]HMRC emphasised that they had, over the life of this appeal, systematically and consistently maintained a position that the Appellant’s disclosure had failed to adequately demonstrate that it had incorrectly been charged VAT. It had failed to demonstrate the receipt of supplies eligible to be exempted from VAT and on which VAT had otherwise been declared.[148]In response to a question from the Tribunal, HMRC confirmed however that they did not dispute that VAT had been collected as shown on invoices which had been scheduled and provided to them by the Appellant (including the invoices described at paragraphs 136 and 143 above).[149]HMRC contended that, on the documents presented by the Appellant as sample transactions, the Tribunal could not be confident that there had been a supply of a “deputy” because the contractual documentation was incomplete and/or unsigned and there was no evidence that workers described variously as locums or temporary workers were deputising or acting as deputies.[150]Not unsurprisingly, HMRC had prepared their criticism of the documentation in advance of the hearing (and without reference to the clip which was produced overnight between days 1 and 2 of the hearing). We note below HMRC’s specific criticisms of the documents in the bundle, identifying where those criticisms relate to the documents in the clip:(1) The audit trail of documents did not evidence that HDL had entered into a framework agreement with HTE nor between HTE and the Appellant, the critical foundation for the basis of the relationship between the Appellant and HDL was therefore missing.(2) Copies of the MVA in the bundle were unsigned and/or incomplete, as identified above, the specification and schedules were missing from the clip. These deficiencies rendered it impossible to conclude that there was a contract for the supply of Temporary Workers at all and, given the scope and formality of the documentation apparently required, it is impossible to conclude that there is an informal contract for supply even by conduct.(3) There were specific inadequacies in the documents in the bundle (and thereby the clip) which failed to demonstrate that the procedures and requirements of the MVA had been complied with in terms of processes for placing orders or whether there was an entitlement for HDL to charge for travel and accommodation. In particular and by way of example: (a) The MVA provided for the use of specific templates as ordering forms and for such templates to take precedence in case of a contractual conflict. However, no such completed templates had been produced. (b) The MVA indicated no entitlement to charge for accommodation, but the schedule attached to invoice 190721 from HDL in the clip demonstrated that accommodation was in fact charged.(4) The Appellant has inconsistently presented its explanation of the documents and repeatedly failed to remediate the deficiencies identified in the documentation as highlighted by HMRC.(5) It was impermissible to infer the general terms and conditions to be applied to the identified supply of Dr BK by reference to the general terms for 2018 and 2022 however similar the general terms were in the prior and post period.(6) The schedules to the HDL invoice, and thereby the invoice, cannot be relied upon because the schedule does not correlate to the relevant purchase order number.(7) It was not clear that the RMSL contract was off framework.(8) There was evidence that a form of the RMSL contract was signed by RMSL in January 2019 and effective from that date; it is not clear whether the contract in the clip purporting to be dated 14 December but of an unspecified year was ever signed or that either were finalised and agreed between both parties.[151]In light of these criticisms, we are invited to conclude that the Appellant has failed to meet the burden of proof which falls on it to demonstrate what supplies have been made to it, such that it is impossible to then conclude the liability of those supplies. There are simply too many gaps in the evidence, and it is not for the Tribunal to assume facts or fill the gaps that the Appellant had effectively chosen not to fill.

Findings of fact

[152]On the basis of the documents in the clip and, despite the challenges to the documents, we are satisfied, in accordance with the approach adopted in Mainpay UT, that the Appellant has demonstrated that it was the recipient of the following supplies:(1) Dr BK as a consultant psychiatrist providing covid relief cover from 28 June 2021 to 1 July 2021 at a cost of £6,097.54 inclusive of VAT.(2) Dr SDR at staff grade to A&E for at least the period 14 – 17 April 2020 at a cost of £5,709.89 inclusive of VAT.[153]Albeit in some regards incomplete, we consider that the copies of the MVA and the RMSL Contract each provide for supplies of doctors as temporary staff to the Appellant.[154]Each of the contracts places the worker under the direction and control of the Appellant.[155]As a consequence of the findings at 153 and 154 above the Appellant received a supply of staff.[156]There is a sufficient audit trail of documents showing that the roles filled by BK and SDR had been requested and ordered by the Appellant who can therefore be inferred to have required the services of a consultant psychiatrist and an A&E doctor in the periods in which BK and SDR were provided.[157]In respect of SDR the timesheets demonstrate the hours worked.[158]It is reasonable to infer that BK worked 39½ hours as HDL billed for those hours and the Appellant was prepared to pay for them.[159]The invoices issued to the Appellant showed VAT as a separate charge which was then paid by the Appellant.[160]The VAT on those supplies was received by HMRC from HDL and RMSL.[161]It is a matter of contract between the Appellant and HDL and RMSL whether it is entitled to recover the VAT as a contractual overpayment.

Application of Item 5 to established facts

[162]On the basis of the facts as we have found them and our interpretation of Item 5, we determine that the Appellant was incorrectly charged VAT on the supplies of Drs BK and SDR. In each case the Appellant was supplied with a registered medical practitioner to fill a post of a registered medical practitioner. BK and SDR were therefore each provided as a deputy for a registered medical practitioner.

Disposition

[163]For the reasons stated we allow the appeal.

Postscript on the forbidden section

[164]As set out above we determined that the non-public and non-parliamentary materials should not form part of our determination of the appeal. However, we allowed HMRC to take us through them de bene esse.[165]We consider that the documents to which we were referred generally support our conclusion in the following regards:(1) In an opinion dated 24 May 1977 HMRC’s solicitor’s office advised on the taxation of deputising services. The background to the note confirms our assessment of the provisions of NHSGMPSR as requiring that the GP using deputising services is “responsible for their own acts and for the acts of the deputising doctors who provide medical services to the GP’s patients” and that the deputising doctors are required to be covered by the medical indemnity insurance. The deputising doctors are noted as required to provide themselves with basic medical instruments, but larger equipment and consumables are provided by the practice to whom the deputy is provided. As such we can see no relevant or material difference between the services provided by a deputising service and those assessed in Mainpay. A deputising service supplies staff not medical care.(2) In the request for a legal opinion dated 14 August 1978 it is noted that “since the inception of VAT we have regarded Group 7 of the Exemption Schedule as including the supply of medical services by a firm which employs persons whose names appear in the statutory registers, roles etc. listed in (a) to (h) of item 1 and items 2 or 3 so long as those persons do in fact provide the services. As bodies corporate cannot be included in any of the statutory medical registers … this interpretation is clearly not in accordance with the law. … We now wish to take the remedial legislative action with the express purpose of formally including within the Group 7 exemption the supply of medical deputising services … provided by the registered etc., employees of legal persons who are unable to be so registered”. This again demonstrates an intention to exempt the supply of persons employed by a deputising service, i.e. the supply of staff.(3) At this time locum services were considered to fall within Item 1(a) with any associated agency fee or commission being taxable. It was not considered at that time that locums were provided as a supply of staff.(4) In a note dated 5 October 1978 accompanying the first draft of the proposed amendment introducing Item 5 the writer states:
“New items 5 and 6 and note (4) deal with deputising services to doctors. … Dealing first with the deputising service, it’s impossible to say for certain the supply is a supply to the doctor as opposed to the patient, or vice versa. If there is a supply to only one person, it’s more likely to be the doctor. However, it has been thought convenient to draft items 5 and 6 in terms which contemplate that there are two supplies, one to the doctor of the deputising services and another supply to the patient consisting of the provision of the actual medical services and goods insofar as a supply of deputising services to a doctor may not cover the whole supply which it is desired to exempt. … I have assumed that in fact it is only general practitioners who avail themselves of deputising services so that I have not provided that the services to them are exempt only while they are practising such …”
The accompanying draft legislative amendment provided for the following exemption provisions:
“5. The supply of deputising services. 6. The supply of services and, in connection with it, the supply of goods which would fall to be exempt under item 1(a) if supplied by a person mentioned therein, when supplied by a person in the course of the supply of deputising services.”
And the following note:
“(4) in this Group “deputising services” means the provision of a deputy for a person registered in the register of medical practitioners, …”
As can be seen, the exemption in fact adopted was substantially different to that first draft, albeit adopting the same language as the proposed note 4. We observe therefore that, rather than the meaning of a deputising service under the NHSGMPSR, a broader definition was proposed, one which was not limited to GPs but on an assumed basis that it was only GPs that used deputising services. There is no explanation in the documents we were provided with (but which we excluded) which explains the change in drafting. We cannot therefore surmise what led to the change.[166]We take the view that in the period 1972 to 1979 HMRC were persuaded that an entity employing registered medical professionals and providing them (by way of a supply of staff – certainly as now interpreted in Mainpay)to clients who used the registered medical professionals to provide medical care needed to benefit from exemption. At the time they considered that the extension was required for out of hours GP cover which were considered to be taxable because of the provision of extra services thus distinguishing them from the provision of locums which were considered to be exempt under Item 1. As apparent from the documentation we consider Item 5 was enacted to provide exemption in circumstances where there was a supply of staff or a wider composite supply of services that did not readily meet the requirements of Item 1(a).[167]The documents which we did not admit demonstrate that this was a policy decision. Whilst HMRC satisfied themselves that the proposed amendment was not ultra vires the directive, that does not make it so. For the reasons stated, we consider that the intention of HMRC and of Parliament when enacting Item 5 was precisely to exempt the provision of staff where those staff were registered medical practitioners assigned to duties under the control of a legal person or entity themselves providing medical care to patients using the staff provided to them. The focus of attention was unquestionably GP out of hours cover but the legislation, as drafted, applied to deputies registered with the GMC generally and was not limited to GPs. Right to apply for permission to appeal This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. Release date: 16th SEPTEMBER 2025

Cited in 3 later judgments