United Kingdom VAT & Duties Tribunals Decisions

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Cite as: [2003] UKVAT V18209

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Isabel Medical Charity v Customs and Excise [2003] UKVAT V18209 (04 July 2003)

VAT – Zero-rating – Charities, Group 15, Schedule 8, VATA – whether the Appellant an "eligible body" – whether it provides "rescue services" within paragraph (h) of Note (4) – the Appellant provides consultant diagnostic services to health-care professionals – held these were not "rescue services" – appeal dismissed

LONDON TRIBUNAL CENTRE

ISABEL MEDICAL CHARITY Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: MR JOHN WALTERS, QC (Chairman)

MR JOHN N BROWN, CBE, FCA, ATII

Sitting in public in London on 23 April 2003

Mr T Meadows, ACA, of Steele Robertson & Co, for the Appellant

Mr Hugh McKay, of Counsel, instructed by the Solicitor for the Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2003


 


DECISION
1. The Isabel Medical Charity ("the Charity"), the Appellant in this appeal is a charity established by Charlotte and Jason Maude and named after their daughter. The Charity is not registered for VAT: it is a private company limited by guarantee, which was incorporated on 9^th November 1999.
2. The Charity was established in consequence of the experience of Isabel Maude, who, aged 3, almost died in April 1999 from rare and severe complications of chicken pox. Isabel suffered multiple organ failure including cardiac arrest and was on life support for nearly four weeks, because various medical practitioners repeatedly failed to recognise that she was suffering from nectrosing fasciitis. Her parents discovered that, had knowledge of the potential complications of chicken pox been quickly accessible to the diagnosing practitioners, Isabel would have been treated promptly and saved much suffering. In order to prevent further cases of what was described as "clinical ignorance" – a term which we were told the relevant hospital accepted was applicable – the Charity was established to launch a computer assisted diagnostic system.
3. The system centres on a website (the Isabel website), which was described to us as an "online clinical decision support and information website covering the whole spectrum of paediatrics". Use of the Isabel website is available free of charge to all registered health professionals at the point of care. It has been designed in particular to assist doctors in reaching a quick and accurate diagnosis and selecting the appropriate treatment.
4. In order to establish the website the Charity purchased computer equipment and software, and the issue in this appeal is whether the supplies of computer equipment and software to the Charity qualify for relief from VAT under the zero-rating provision at Item 5, Group 15, Schedule 8, VAT Act 1994 ("VATA"). The appeal is brought against a decision by the Commissioners that they do not so qualify.
5. Group 15 is headed "Charities etc" and Item 5 covers

"the supply of any relevant goods to an eligible body which pays for them with funds provided by a charity or from voluntary contributions or to an eligible body which is a charitable institution providing care or medical or surgical treatment for handicapped persons".

6. It is the first limb of this Item which is in point in this appeal and the Commissioners accept that the goods supplied are "relevant goods" and that the Charity pays for them "with funds provided by a charity or from voluntary contributions". Therefore the issue for us is whether or not the Charity is an "eligible body".
7. "Eligible body" is defined by Note (4) to Group 15 to mean a body as described in any of paragraphs (a) to (j) inclusive of that Note. The Charity relies on paragraph (h) which reads:

"a charitable institution providing rescue or first-aid services".

8. The Commissioners accept that the Charity is "a charitable institution" for these purposes and the Charity does not submit that it provides first-aid services. Therefore the issue in this appeal is refined to the single point: does the Charity provide "rescue services" for the purposes of Note (4) to Group 15?
9. The relevant facts are not in dispute. We heard evidence from Dr. Joseph Britto, Consultant in Paediatric Intensive Care at St. Mary's Hospital, and from Mr. Jason Maude.
10. In Dr. Britto's phrase, the Charity's computer system "provides a consultant at the coal face". The medical practitioner seeing a patient who is brought in for the first time (for example to an Accident and Emergency Unit) is able to put questions to the system, and the system's answers to the questions put, assist the practitioner himself or herself to make cognitive clinical decisions.
11. Dr. Britto explained that there are three steps in the diagnostic process: information gathering; pattern recognition; and decision making. The system assists in the first two steps, and doubtless also in the third step, but in the end the practitioner will make the ultimate diagnostic decision. The software is sophisticated enough to lead the practitioner into lines of enquiry of which he or she may have been unaware at the start of the diagnosis, and is more interactive than simply being the electronic equivalent of a medical library.
12. There are 9,600 registered users of the website, all of them being health-care professionals.
13. Mr. Maude's evidence was that the website was set up to deal with widespread total ignorance of rare complications at the point of first diagnosis. Using the website effectively forces a practitioner to consider the various diagnostic possibilities to which the patient's symptoms give rise. Mr. Maude stressed the advantages given by the quickness of the system and its ubiquity. It can be operated off a hand-held device.
14. Against this factual background the Tribunal must decide whether the Charity supplies "rescue services".
15. In submitting that it does, Mr. Meadows made the following points:
16. The term "rescue" is not defined in the legislation. He cited the Oxford English Dictionary definition which includes:

"-The act of rescuing (especially persons) from enemies, saving from danger or destruction etc., succour, deliverance" or

"-To deliver or save (a person or thing) from some evil or harm".

17. His main submission was that "rescue" includes diagnosis of a physical medical condition in the sense that cure from such a condition (of which diagnosis is the essential first step) is "deliverance" or "saving" of a person from harm.
18. He submitted that the Charity supplied, through the website, consultation services, which are used by health-care professionals in diagnosing patients' conditions. The consultation services, he submitted, contributed to the diagnosis carried out by the health-care professional.
19. He submitted that the Charity and the health-care professionals involved were, as a team, involved in diagnosis and treatment, and therefore "rescue". It did not matter that the Charity's services were not supplied directly to the patient being diagnosed, treated or "rescued", because "rescue services" can be supplied to a person to enable that person physically to perform the rescue. He cited the Tribunal cases of Severnside Siren Trust Limited (Tribunal reference: 16640; Chairman: Mr. Angus Nicol; Release date: 16^th May 2000) and Dr. C. John Eaton (1987).
20. We summarise the submissions made by Mr. McKay for the Commissioners, as follows. First, the services provided by the Charity are not "rescue" services, since the services are provided by the Charity to health-care professionals, and not their patients, and whatever meaning the Tribunal puts on "rescue", the health-care professionals are not being "rescued". A charitable institution providing rescue services within paragraph (h) of Note (4), Group 15, Schedule 8, VATA must be one providing rescue services directly to the person being rescued. He relied on EC v Germany [1985] ECR 2655 for the proposition that there must be a "direct link" between the provider of rescue services and the person being rescued.
21. Secondly, as a matter of language, "rescue", at any rate in the context in issue in this appeal, does not include the provision of medical services.
22. As we see it, the main point for our decision is whether "rescue services" within paragraph (h) of Note (4), Group 15, Schedule 8, VATA includes the diagnosis, healing or treatment of physical illness. The Charity argues that it does, citing the dictionary definition given above: the Commissioners contend that it does not. Mr. McKay says that "rescue services" in context are confined to "a plucking out" from a physical, external danger – delivery from a place of physical danger (for example a shipwrecked vessel or a building on fire) to a place of physical safety.
23. Mr. Meadows, in reply, argued that the Charity's services enabled patients to be rescued from external hazards, viz: viruses, germs, gases, poisons or toxic chemicals.
24. This seems to us to be an argument as to whether we should attribute a literal or a metaphorical meaning to "rescue". A literal meaning would confine the ambit of the term to removal from physical danger – rescue from shipwreck or fire, for example. A metaphorical meaning would extend the ambit of the term to deliverance from harm or evil – rescue from disease, rescue from bankruptcy, even rescue "out of the jaws of death" – a formulation contained in the Book of Common Prayer^[1] (in which the word "jaws" is also used metaphorically). We recognise that the word "rescue" can indeed carry a metaphorical meaning in ordinary speech.
25. We are confident, however, that the correct meaning to be given to "rescue" in this statutory context is the literal one.
26. "Rescue services" are set, in context, in apposition to "first-aid services". There is no suggestion that the term "first-aid" services carries an ordinary metaphorical meaning. On the contrary, "first-aid services" appear to feature in paragraph (h) to supplement "rescue services". On the Charity's argument, "first-aid services" would, we consider, be another type of "rescue services".
27. Also, the whole tenor of Note (4) (the definition of "eligible body") suggests to us that the words used should be given their precise, or literal, meaning. For example, paragraph (f) includes within the definition "a charitable institution providing care or medical or surgical treatment for handicapped persons". "Care", "medical treatment" and "surgical treatment" are concepts sufficiently close in meaning that, if a wide or metaphorical meaning were adopted for them, there could easily be overlap between the meanings of the terms the draftsman has employed. The statutory language suggests to us that such overlap was not intended.
28. Further, we note that health and welfare services within Group 7 of Schedule 9, VATA are exempt, and this is an indication to us that the zero-rating provision for charities (Group 15 of Schedule 8) ought not to be construed widely to cover services which are, by their nature, essentially health services.
29. We therefore dismiss the appeal on the ground that the diagnostic services to which the Charity contributes are not, by their nature, "rescue services" within the meaning of paragraph (h).
30. It is therefore not necessary for us to comment on the other issue raised –whether the fact that the Charity supplies its services to health-care professionals rather than patients, prevents those services from being "rescue services", even if the medical services provided to patients were properly to be regarded as "rescue services".
31. We are not persuaded that, where services are supplied in circumstances where they will obviously be used by the recipient of the supply in rescuing a third party, the wording of Group 15 of Schedule 8 indicates that the supply cannot be categorised as a provision of "rescue services". The Tribunal's decision in Severnside Siren Trust Limited provides some support for the proposition that they should be so categorised, and it seems to us that EC v Germany (which is a case on the exemption of public postal services under Article 13 A (1) (a) of the Sixth Directive (77/388/EEC) – and, obviously, not on the UK's domestic zero-rating legislation) does not compel a different view. But in view of the fact that this issue does not arise for our decision, it will not be helpful for us to say anything further in this context.
32. The Commissioners did not ask for their costs in the event that they were successful and so we make no order for costs.
JOHN WALTERS QC CHAIRMAN RELEASED:

LON/2002/113

Note 1   The first Collect of Thanksgiving in the section “Forms of Prayer to be used at Sea”.    [Back]