Supply was of medical staff, not medical care, and was not exempt

In Mainpay Ltd v HMRC [2021] UKUT270, the Upper Tribunal found that the taxpayer was supplying staff not medical care. The supplies were not exempt and were taxable at the standard rate.

Mainpay Ltd (Mainpay) was an umbrella company providing temporary medical staff. 

• Over a three year period, it made supplies of medical staff to an intermediary agency company, Accident & Emergency Agency Limited which in turn had separate contracts for supplies to NHS Trusts.
• Mainpay had separate contracts with medical consultants and specialist GPs and treated them as employees, taxing them under Pay-As-You-Earn (PAYE) and paying National Insurance Contributions (NICs).
• Mainpay treated the supplies as VAT-exempt medical care within Group 7 Schedule 9 VATA 1994 on the basis they were providing medical care and not staff.
• HMRC argued the supplies were of staff at the standard rate and raised VAT assessments totalling £164,866. Mainpay Appealed.
• The First Tier Tribunal (FTT) dismissed the appeal concluding that whilst the NHS Trusts did not have ‘contractual control’ over the staff, they had some 'operational control'. This meant there was a supply of staff that was standard rated and not of medical care which would have been exempt.
• Mainpay Appealed to the Upper Tribunal (UT). They said that the medical practitioners exercised control over clinical decisions meaning the activities of those practitioners were attributed to the economic activity of Mainpay. This had the result that Mainpay did not supply control of the medical practitioners, which would have been a supply of staff, but instead supplied clinical decision-making, which was medical care.

The UT dismissed the appeal.

• The NHS Trusts appeared to have exercised the same degree of control over the consultants and specialist GPs as they did over the consultants which it employed.
• Mainpay did not play any part in the treatment given, did not supervise its medical practitioners or decide who worked where or what their rate of pay was, (this was done by the agency and NHS trusts), and did not have any relationship with the patients to whom medical care was provided. It was therefore not supplying medical care.
• The FTT took account of all relevant circumstances, carefully considered the contractual arrangements and was correct that the relevant test was not whether there was a transfer of control over clinical decision-making but whether control had been transferred over the way in which the consultants worked. There was no basis for the UT to interfere with the FTT’s conclusion therefore it stood and the supply was of staff.

Useful guides on this topic

Health and welfare: VAT
Reduced rating, zero-rating and VAT exemption can apply to various services relating to medical care, health and welfare.

Supply of GPs was a service and VAT exemption upheld
In Archus Trading Limited v HMRC [2020] TC07557, the First Tier Tribunal (FTT) concluded that the supply of GPs were supplies of services, not staff, and qualified for VAT exemption.

External link

Mainpay Ltd v HMRC [2021] UKUT270