Beynon and Partners v Customs and Excise Comrs

For VAT purposes, a transaction involving medical consultation, prescription, provision and administration of a drug may comprise more than one supply. The consultation and diagnosis constitute an exempt supply of medical services. The provision and administration of the prescribed drug constitute a separate composite supply. Although administration may require medical skill, the dominant element of that composite supply is the drug, because the typical patient seeks to obtain the drug and the injection is a means of enjoying it. The composite supply is therefore treated as a supply of goods and is zero rated where the statutory conditions are met. Transactions which are economically comparable should, so far as possible, receive equal VAT treatment.

Doctors providing pharmaceutical services to regulation 20 patients supplied drugs which they sometimes dispensed for takeaway use and sometimes personally administered, usually by injection or vaccination. The Commissioners accepted that dispensed drugs were zero rated but treated personally administered drugs as part of an exempt supply of medical care.

The Manchester VAT Tribunal upheld that approach, and Lawrence Collins J dismissed the doctors’ appeal. The Court of Appeal considered whether the transaction involved a single supply or separate supplies and, if separate, whether the supply involving provision and administration of the drug was a supply of goods or services.

1. Appeal allowed. The judge had erred in treating the classification issue as one of fact. The VAT Tribunal’s findings of fact were not in dispute; the legal effect of the transaction was a question of law. The Tribunal had also misunderstood an important aspect of the evidence concerning prescriptions.
2. The court applied the guidance in Card Protection Plan Ltd v Customs and Excise Commissioners Case C-349/96; [1999] STC 270. All the circumstances must be considered, the essential features identified, and a single economic supply must not be artificially divided. No single factor, including separate pricing or physical and economic dissociability, is conclusive.
3. The relevant transaction had three features: consultation and diagnosis leading to the medical decision and prescription; provision of the drug; and administration of the drug. The consultation and diagnosis were physically and economically dissociable from the provision and administration. The patient could refuse the injection or self-administer the drug. The transaction therefore comprised two supplies: exempt medical services, and a supply comprising provision and administration of the drug.
4. The provision and administration were not independent of each other. For the typical consumer, the administration was a means of better enjoying the drug and was ancillary to its provision. The dominant element was the drug. The composite supply consequently took the character of a supply of goods and was zero rated under section 30 and Schedule 8 of the Value Added Tax Act 1994.
5. This conclusion promoted equal VAT treatment of comparable transactions, including drugs dispensed for self-administration and drugs supplied for administration by the doctor. The order of Lawrence Collins J and the Tribunal’s decision were set aside. The respondents were ordered to pay the costs of the appeal and below, subject to detailed assessment. Permission to appeal to the House of Lords was refused.

• Court of Appeal: Appeal allowed; the order of Lawrence Collins J and the decision of the Manchester VAT Tribunal were set aside.
• Chancery Division: Lawrence Collins J dismissed the appeal from the Manchester VAT Tribunal on 27 March 2002.
• Manchester VAT Tribunal: The Tribunal held that personally administered drugs formed part of a single exempt supply of medical services.