Royal Midland Counties Home For Disabled People v Commissioners of Customs and Excise

On a second appeal, arguability or a real prospect of success is insufficient. Permission requires an important point of principle or practice, or another compelling reason for the Court of Appeal to hear the case. Whether goods are supplied for use with qualifying medical equipment is a factual question directed to the purpose of the particular transaction, not an inquiry into the recipient’s state of mind. Where the dispute concerns whether an item is an accessory in unusual circumstances, and the first-instance judge has applied the Commissioners’ existing guidance, the issue will not ordinarily amount to an important point of principle. If the guidance is considered inconsistent with the statute, it should first be amended. A compelling reason requires material evidence of serious practical difficulty.

The Commissioners sought renewed permission to appeal from an order of Neuberger J dated 20 June 2001. The judge had allowed the appeal of Royal Midland Counties Home For Disabled People from a decision of the VAT and Duties Tribunal dated 22 December 2000.

The dispute concerned whether a standby generator supplied for use with medical equipment was an “accessory” within Note 3(c) to Group 15 in Schedule 8 of the Value Added Tax Act 1994, so that the supply qualified for zero-rating. The Tribunal had rejected that classification, while the High Court accepted it. The central issue before the Court of Appeal was whether the proposed second appeal met the statutory permission threshold.

1. The renewed application was governed by CPR 52.13 and section 55(1) of the Access to Justice Act 1999. The Court therefore had to ask whether the proposed appeal raised an important point of principle or practice, or whether there was some other compelling reason for the Court of Appeal to hear it.
2. The Court did not have to decide the merits of the proposed appeal or determine whether it had a real prospect of success. The issue was plainly arguable because the High Court judge had reached a different conclusion from the Tribunal on a difficult question, but arguability did not satisfy the permission requirement.
3. The proposed distinction between a subjective and an objective test did not identify an important point of principle. Whether goods were supplied for use with listed medical equipment depended on the purpose for which they were supplied in the particular transaction. That was a question of fact. It did not require investigation of the recipient’s personal intention.
4. The remaining issue was whether a generator could be an accessory where its usefulness arose only when the mains supply failed. The High Court judge had adopted the Commissioners’ working definition in Notice 701/6, under which an optional extra could enable equipment to be used in particular circumstances. It was plainly arguable that this included circumstances in which the equipment could not operate without the extra. Since the challenge was based on the existing guidance, it did not presently raise an important point of principle. If the Commissioners considered that the guidance misstated the statute, they should amend it first.
5. No important point of practice or compelling reason was established. There was no material showing serious practical difficulty requiring immediate resolution. The application for permission to appeal was refused.

1. Court of Appeal (Civil Division) — On 12 October 2001, the renewed application by the Commissioners for permission to appeal was refused: [2001] EWCA Civ 1548.
2. High Court, Chancery Division — Neuberger J allowed the Home’s appeal from the VAT and Duties Tribunal on 20 June 2001 and held that the standby generator was an accessory for use with medical equipment.
3. VAT and Duties Tribunal — On 22 December 2000, the Tribunal held in substance that the standby generator was not an optional extra or accessory within the relevant zero-rating provision.