United Kingdom VAT & Duties Tribunals Decisions

E Moss Ltd v Revenue & Customs [2006] UKVAT V19510 (27 March 2006)

19510

VALUE ADDED TAX – exempt supplies – health and welfare – services supplied by chiropodists who were not registered – whether services directly supervised by a person who was registered – mostly yes – appeal on this issue allowed in principle – VATA 1994 s31 and Sch 9 Grp 7 Item 1(c) and Note (2)

VALUE ADDED TAX – exempt supplies – health and welfare – services supplied by chiropodists who were not registered and who were not directly supervised by a person who was registered – whether the way in which Article13A1(c) had been implemented in the United Kingdom contravened the principle of fiscal neutrality – no – appeal on this issue dismissed – Sixth Directive (77/388/EEC) Art 13A1(c)

LONDON TRIBUNAL CENTRE

E MOSS LIMITED

Appellant

-and-

THE COMMISSIONERS OF HER MAJESTY'S

REVENUE AND CUSTOMS

Respondents

Tribunal: DR A N BRICE (Chairman)

MRS R A WATTS-DAVIES MHCIMA FCIPD

Sitting in public in London on 22 and 23 November 2005

and 5 January 2006

Michael Sherry of Counsel, instructed by KPMG LLP, for the Appellant

Caroline Neenan of Counsel, instructed by the Acting Solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2006

DECISION

The appeal

1. E Moss Limited (the Appellant) appeals against two decisions of what is now Her Majesty's Revenue and Customs (the Respondents). The two decisions were dated 1 August 2003 and 3 June 2005 respectively. The first decision related to the period from May 2000 to June 2002 and the second decision related to the period from July 2002 to February 2005. The Appellant had claimed the sums of £734,656 and £655,944 which, it said, had been overpaid as value added tax because supplies of the services of unregistered chiropodists, which had been treated as standard-rated, should have been treated as exempt because the supplies were made under the direct supervision of registered chiropodists.
2. The two disputed decisions refused the Appellant's claims on the ground that the supplies of chiropody made by the Appellant were not exempt because the supplies were made by persons who were not registered and who were not directly supervised by persons who were registered.

The legislation

3. Article 13 of the Sixth Directive (77/388/EEC) contains the exemptions. Article 13A contains the exemptions for certain activities in the public interest. The relevant parts of Article 13A1 provide:

"1. Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any possible evasion, avoidance or abuse: …

(c) the provision of medical care in the exercise of the medical and paramedical professions as defined by the Member States concerned,".

4. Section 31 of the Value Added Tax Act 1994 (the 1994 Act) provides that a supply is an exempt supply if it is of a description specified in Schedule 9. Group 7 of Schedule 9 specifies certain supplies of health and welfare. Before 9 July 2003 the relevant parts of Item 1 of Group 7 specified:

"1. The supply of services by a person registered or enrolled in any of the following:

(c) any register kept under the Professions Supplementary to Medicine Act 1960;".

5. After 9 July 2003 Item 1(c) did not refer to any register kept under the Professions Supplementary to Medicines Act 1960 but referred instead to "the register kept under the Health Professions Order 2001".
6. Note (2) to Group 7 provides:

"(2) Paragraphs (a) to (d) of Item 1 … include supplies of services made by a person who is not registered or enrolled in any of the registers or rolls specified in those paragraphs where the services are wholly performed or directly supervised by a person who is so registered or enrolled."

The issues

7. The Appellant owns the business of Scholl. At the relevant time Scholl employed chiropodists some of whom were registered and some of whom were not. The Appellant argued that most of the unregistered chiropodists were directly supervised by registered chiropodists and so the supplies made by the unregistered chiropodists were exempt within the meaning of Note (2) and Item 1(c) of Group 7 of Schedule 9. The Appellant accepted that in some cases an unregistered chiropodist might not in fact have been directly supervised by a registered chiropodist and so the exemption in Note (2) and Item 1(c) of Group 7 of Schedule 9 would not apply. However the Appellant argued that, in such cases, the supplies were exempt under Article 13A1(c) of the Sixth Directive as were the supplies of all unregistered chiropodists. .
8. Thus the issues for determination in the appeal were:

(1) whether the supplies made by the unregistered chiropodists were directly supervised by registered chiropodists and so were exempt under Note (2) and Item 1(c) of Group 7 of Schedule 9; and

(2) whether the supplies made by all the unregistered chiropodists, even if they were not directly supervised by registered chiropodists, were exempt under Article 13A1(c) of the Sixth Directive

The evidence

9. Two bundles of documents were produced by the parties. Oral evidence was given on behalf of the Appellant by:

Ms Elizabeth Nelson, the Head of Buying and Marketing for Scholl; between April 2003 and March 2004 Ms Nelson was the executive responsible for the clinical side of Scholl's business;

Ms Margaret Anne Wales; Ms Wales is currently a Regional Podiatric Manager with Scholl and previously was a Regional Senior Clinician; she has a diploma in podiatric medicine and is a Member of the Society of Chiropodists and Podiatrists. She is a registered podiatrist.

Professor Steven West, BSc, DPodM, FChS, MPodA, MIPEMS. Professor West is a Professor of Healthcare at the University of the West of England and also holds the post of Pro-Vice Chancellor of the Faculty of Health and Social Care at the same University. Professor West has acted as a consultant for Scholl for over twenty years in the area of the education, training and recruitment of chiropodists.

10. Oral evidence was given on behalf of the Respondents by:

Mr Alistair Henderson, an Officer of HM Revenue and Customs; Mr Henderson is currently employed as a National Business Manager in the Large Business Service and his duties include managing the indirect tax affairs of the Appellant; and

Mr Andrew John Littlewood, an Officer of HM Revenue and Customs; Mr Littlewood is currently employed by the Respondents as a Taxation Specialist in the Large Business Service.

The facts

11. From the evidence before us we find the following facts.

The Appellant and its business

12. The Appellant carries on the business of dispensing chemists and providers of health care services. In May 2000 the Appellant acquired the business of Scholl which at the time provided services of chiropody and foot care through fifty-five shops. The Appellant's main activities remain the retailing and dispensing of medicines and appliances and the Scholl shops have not been integrated into the Appellant's accounting systems. This appeal concerns only the supplies of the services of chiropody made by the Scholl shops.

The chiropody profession and its regulation

13. At the time of the period of the commencement of the claim the subject of this appeal (namely May 2000) Item 1 of Group 7 of Schedule 9 of the 1994 Act referred to any register kept under the Professions Supplementary to Medicine Act 1960 (the 1960 Act). Section 1 of the 1960 Act established a Council for Professions Supplementary to Medicine and provided that, for each of the stated professions, there should be a board with the general function of promoting high standards of professional education and conduct. Chiropody was one of the stated professions. Section 2 provided that it should be the duty of each board to prepare and maintain a register of the persons entitled under the Act to be registered and who applied to be registered. Section 3 set out the conditions under which a person was entitled to be registered. Section 6 provided that a person who was registered was entitled to use the title of registered chiropodist. Other sections of the 1960 Act contained provisions about the approval of courses and disciplinary provisions. Thus, at that time, a registered chiropodist was a person who was registered under the provisions of the 1960 Act.
14. As a condition of registration a registered chiropodist had to graduate from a recognised training course which involved three years of full-time study. The three-year course contained instruction in anatomy, physiology, pathology, surgical conditions, diagnostics, prescriptions, pharmacology and treatments. A registered chiropodist was trained to apply complex diagnostic techniques to identify non-obvious foot disease and to apply appropriate treatments, including cryo-therapy involving the use of liquid nitrogen and the use of local anaesthetics. Only registered chiropodists could perform biomechanical assessments; give prescriptions, or administer local anaesthetics.
15. In 1999 the 1960 Act was repealed by the Health Act 1999 (the 1999 Act). Section 60(1) of the 1999 Act provided that Her Majesty by Order in Council could make provision modifying the regulation of stated professions including chiropodists. The Health Professions Order 2001 SI 2002 No. 254 (the 2001 Order) was made under the provisions of section 60 of the 1999 Act and came into force piecemeal after 12 February 2002. The 1994 Act was amended with effect from 9 July 2003. The 2001 Order now regulates the stated professions including chiropodists and podiatrists. The Order created a new regulatory body, the Health Professions Council (the Council) which replaced the Council for Professions Supplementary to Medicine. Article 5 of the Order requires the Council to establish and maintain a register of members of the relevant professions, including chiropodists and podiatrists. A person can only be entered in the register of chiropodists and podiatrists if he or she qualifies for registration. The Council must also establish from time to time standards of education, training, conduct and performance for members of the relevant professions and ensure the maintenance of those standards. The Council now regulates twenty-one health care professions, including chiropody.
16. We saw a document issued by the Council in July 2003 entitled "Standards of Proficiency - Chiropodists and Podiatrists". This document described skills and standards which governed registered chiropodists and also contained provisions about continuing registration. We also saw another document published by the Council in 2003 entitled "Standards of conduct, performance and ethics". This was directed at health care professionals generally.
17. Initially only a person registered as a chiropodist under the 1960 Act or the 2001 Order could practice as a chiropodist in the National Health Service (although an unregistered person could practice as a foot care assistant in the National Health Service). Within the National Health Service a registered chiropodist could also specialise in, for example, diabetes, dermatology or vascular diseases. However, outside the National Health Service there was no legal restriction on the use of the title chiropodist and unregistered persons could call themselves chiropodists and could supply the services of a chiropodist.
18. Following the introduction of the 2001 Order, and for a transitional period until 9 July 2005, the provisions about registration were revised. Unregistered chiropodists could become registered if they complied with conditions relating to their experience, even though they may not have attended the three-year training course normally attended by registered chiropodists. The conditions relating to experience included practice for three out of the last five years, suitable references and proof of safe practice. Since 9 July 2005 the use of the title chiropodist has been confined to registered persons and it has been unlawful for any person to practice as a chiropodist without being registered under the 2001 Order.
19. Thus the chiropody profession is split between private providers like Scholl and state provision made through the National Health Service. Under the system of registration as it existed under the 1960 Act most registered chiropodists worked in the National Health Service after qualification. The National Health Service deals with the most complex and challenging of foot problems and the foot complaints dealt with within the National Health Service are usually high risk. By contrast, the business of Scholl is the provision of private treatment and advice for relatively minor foot care problems of which the most common are nail care, corns, callouses, veruccae, fungal infections and other non-invasive procedures.

Scholl and its business

20. At present Scholl operates 49 shops throughout the United Kingdom and has a turnover of about £16M each year. 60% of the turnover comes from retail sales (of shoes and foot care products) and 40% of the turnover comes from the clinical side of the business (chiropody and foot care services). Scholl makes supplies of chiropody services through about 220,000 appointments each year. After 1998 Scholl only recruited chiropodists who were registered. All the unregistered chiropodists who were employed by Scholl before 1998 became registered before the end of the transitional period under the 2001 Order, that is before 9 July 2005.
21. At the time of the claims the subject of this appeal (that is, between May 2000 and February 2005) Scholl employed at any one time approximately 120 chiropodists some of whom were registered and some of whom were unregistered. At the relevant time in the Scholl shops the registered and the unregistered chiropodists had the same job title and performed broadly the same functions; however about two and a half per cent of activity had to be undertaken by a registered chiropodist. There is now a policy that every patient has to be seen first by a registered chiropodist. Also, if a patient requires a procedure that can only be provided by a registered chiropodist, then that patient is referred for a consultation to a registered chiropodist. During the time of the claim there were a very few branches where no registered chiropodist was employed. In such a branch appointments requiring a registered chiropodist would be made on a day when a registered chiropodist would visit. When she was a senior clinician Ms Wales used to visit stores with no registered chiropodist every four weeks and would then see patients who needed to see a registered chiropodist.
22. Each Scholl shop is divided into two parts, one for retail sales and the other for clinical services where separate booths or cubicles are provided for treatment. Most stores have three cubicles but some have five. In evidence which we accept Mr Henderson told us that it was not possible to hear what was going on in the cubicles at the Watford store (which he had visited) if the cubicle door was closed. Each chiropodist has a maximum of fourteen appointments each day for half an hour each; however, the average number of daily appointments is about ten. In each store there is a branch manager who is responsible for the retail sales. Chiropodists are subject to two management structures. They report to the branch manager for operational purposes but, for clinical purposes, they are subject to supervision by a senior clinician and/or audit by a clinical auditor. We describe the roles of the senior clinician and the clinical auditor below.

Training of unregistered chiropodists

23. When new chiropodists join Scholl they receive induction training. The induction procedure is carried out by registered chiropodists. We saw a copy of Scholl's Chiropody Induction Manual which had been prepared in that format within the last five years. This is a lengthy document of 123 pages. It includes details of a model clinical audit and a clinical audit checklist; we discuss the clinical audit further below. A chiropodist newly employed by Scholl has a four-week induction period during which some time is spent in the retail part of the store and some time is spent with another chiropodist observing the treatment of patients. The induction manual does not make any reference to the supervision of unregistered chiropodists by registered chiropodists at the same shop.
24. Several years ago (probably in the late 1980s) Scholl developed a training programme directed to its clients' needs. The training covered both practice and theory. On this course the unregistered chiropodists were trained to carry out simple diagnostic procedures and treatments which were directed towards non-invasive palliative care. They could not undertake x-rays or ultrasound techniques. After three months there was an assessment on both practical and theoretical knowledge and, if a unregistered chiropodist succeeded, he or she became eligible to become an associate member of the Institute of Chiropodists (the Institute). After practising for three years associate members were eligible to become full members. Members of the Institute were regulated by its code of conduct. We saw a copy of the course prospectus for the training programme which was prepared in association with the Institute. This training programme did not lead to registration under the 1960 Act or the 2001 Order. The Institute was not recognised for the purposes of registration; only the Society of Chiropodists and Podiatrists was so recognised. This training programme ceased as from December 2001.
25. Between 2001 and 2004 Scholl held an annual continuing professional development conference where speakers addressed chiropodists on specific topics. The purpose of the conference was to keep chiropodists up-to-date with the latest developments in clinical procedures, diagnostic techniques and treatments. In 2004 it was intended that continuing training should be changed and that each chiropodist would be given a budget to fund attendance on professional courses. This has not yet been implemented and continuing professional development is now given through the dissemination of communications and professional journals together with support for individual chiropodists who want to attend professional courses. Scholl gives its employed chiropodists time off with pay to attend courses which relate to treatment offered by Scholl.

The in-branch registered chiropodists

26. In most branches, registered and unregistered chiropodists work together and are paid the same rates of salary. The conditions of registration used to provide that a registered chiropodist could not formally train an unregistered chiropodist and the job specification of a registered chiropodist employed by Scholl did not make any mention of supervising unregistered chiropodists. However, in evidence which we accept, Professor West stated that the registered chiropodists were available to see the clinical procedures carried out by the unregistered chiropodists and to advise and assist them; he also relied upon the general principle that all medical professionals had a responsibility to support each other and to question practices which did not support patient well-being. If a registered chiropodist saw anything which was inappropriate he or she would have a duty to bring it to the attention of a senior clinician.
27. We accept the evidence of Ms Wales that she has seen an unregistered chiropodist asking a colleague for advice and that she personally had been asked for a second opinion. We also accept the evidence of Ms Nelson that any chiropodist would consult his or her colleagues on a reasonably regular basis and that chiropodists who had attended a continuing professional development course would be expected to share the outcome with his or her colleagues.

The senior clinicians

28. As mentioned above the chiropodists employed by Scholl are subject to two management structures. They report to the branch manager for operational purposes but, for clinical purposes, they are subject to supervision by a senior clinician. Scholl employs senior clinicians who provide clinical supervision of all the chiropodists, registered and unregistered, employed by the Appellant. The arrangements have changed over the years and there is now one national senior clinician and two assistant senior clinicians together with two clinical auditors. All the senior clinicians and clinical auditors are registered chiropodists and have a three year degree or diploma. However, the registrations of some senior clinicians and clinical auditors lapsed during the period of the claim because of a failure to renew their registrations. Although the number of senior clinicians has changed over the years, at all times their reporting role within the management structure of the Appellant and Scholl has remained distinct from that of operational management. This arrangement ensures that a registered chiropodist (or at least one entitled to be registered) supervises all clinical aspects of the supplies made by Scholl. The senior clinicians are not the line managers of the chiropodists who work in the branches but they do supervise the clinical services supplied by those chiropodists.
29. We saw the job description in 2000 of a clinical manager to whom three senior clinicians reported. We also saw the job descriptions of a senior clinician and a clinical auditor. From 2000 to 2003 the senior clinicians reported to a clinical manager who reported to the managing director of Scholl. Between April 2003 and March 2004 they reported to Ms Nelson who reported to the board of the Appellant. From March 2004 to January 2005 Ms Nelson reported to the managing director of Scholl and after September 2004 the senior clinicians reported to Professor West
30. The senior clinicians visit the Scholl branches in their area on a regular basis to provide clinical advice and guidance. A senior clinician could visit two or three branches in a day and each store in the United Kingdom will be visited by a senior clinician about twice a year. Most of these visits are unannounced unless the senior clinician wishes to speak to the branch manager. On such a visit the senior clinician will visit the clinical area and check that all the arrangements comply with Scholl's standards. He or she will ensure that all treatments and advice have been documented. Prescription pads will be checked. If records have not been kept correctly the senior clinician will speak to the chiropodist concerned. We accept the evidence of Ms Wales that she would check a minimum of ten records at each visit. The visiting senior clinician will also sit in on two consultations. Exceptionally the senior clinician might commence disciplinary action against a chiropodist.
31. In evidence which we accept Ms Wales described to us her work as a senior clinician. In that capacity she was responsible for 49 branches and supervised 110 registered and unregistered clinicians. In 1999 a communication was sent to all branches with information about the role of the senior clinicians. She called at all the branches for which she was responsible to introduce herself and to give an outline of her role. After that she met all chiropodists as they were recruited and welcomed them on their first day of employment. That meant that all the chiropodists knew who she was and had her telephone number. We also accept the evidence of Ms Wales that much of her time as a senior clinician was spent at branches dealing with clinical issues that had arisen at branch level. When she attended a branch she would also carry out a short informal audit of the clinic to see that it was being maintained to the correct standard. She would also speak to the chiropodists to see if they had clinical issues they wanted to discuss. The chiropodists would discuss with Ms Wales any clinical issues which they could not resolve themselves. If she finished early at one branch she would make an informal visit to a neighbouring branch that she had not visited for some time.
32. The senior clinicians are permanently available by telephone for all the chiropodists to consult if they have any clinical problems or require advice. Ms Wales told us that she could receive between twenty or thirty calls each day and about half of those were enquiries about clinical issues. The senior clinicians also check records, especially if there have been complaints, but also at random. The senior clinicians and clinical auditors work as a team to maintain uniform standards and so as to ensure that the same services are delivered in all Scholl shops wherever they are.
33. The senior clinicians refer any difficult cases to Professor West. This happens rarely and only in the most complex cases. If Professor West were of the view that a patient would be better treated in the National Health Service he would cross-refer the patient through the patient's general practitioner or to a private consultant if that was the wish of the patient.

The clinical audit and appraisals

34. As mentioned above the Scholl Chiropody Induction Manual includes details of a model clinical audit and a clinical audit checklist. Also, in or about 1998, Professor West originated a document called "Clinical Protocols" for the use of Scholl's clinical staff including both registered and unregistered chiropodists. The document was similar to that used at the University of Huddersfield for registered chiropodists. The document was developed at Scholl to ensure safe and effective care and management of the risk of infection and other matters. It did not deal with foot pathology or with advanced diagnostic testing. Where it dealt with local anaesthetics it was meant to apply only to chiropodists who had the competence to administer them. The document was devised to ensure that all procedures satisfied the relevant industry guidelines and also satisfied Scholl's indemnity insurers. It advised that if a chiropodist was in any doubt about treating a patient the patient could be referred to his or her general practitioner.
35. Scholl has a clinical audit procedure which seeks to identify and remedy any clinical issues that arise at branch level. The procedure is based on Professor West's "Clinical Protocols". Both registered and unregistered chiropodists are audited at least once, and sometimes twice, each year either by a senior clinician or by a clinical auditor. The chiropodists to be audited would not be warned in advance. The person carrying out the audit would check the holiday records and ensure that he or she could audit all the chiropodists in the branch on one day. When the auditor arrived at the branch he or she would make a general inspection and sit in on one or two consultations of each chiropodist. The clinical audit checklist would be completed for each chiropodist who was audited. The auditor was required to state whether or not the chiropodist was conforming to each procedure and was also invited to make appropriate comments. Where remedial action was required this was noted. After the audit the auditor would sit down with the branch manager and the chiropodist and discuss the outcome and advise on any remedial action. After the visit the audit report was typed and provided to the chiropodist and the branch manager.
36. In addition to the clinical audit each chiropodist had an annual appraisal with the branch manager. As part of the appraisal process the branch manager was required to discuss the chiropodist's clinical performance and the chiropodist was required to demonstrate that he or she had taken measures to address any clinical problems that had arisen and been identified during the year.

General

37. The level of complaints about the services provided by Scholl is low and most complaints relate to minor matters such as a nick or cut received during treatment. Scholl receive about 60 complaints each month of which only about eight or nine relate to clinical matters. The incidence of serious complaints is also very low. Scholl forward to Professor West complaints which are clinically oriented and Professor West advises in the resolution of such complaints. He deals with between four and six such complaints each year and he might visit the patient and give a clinical opinion. .
38. We accept the evidence of Professor West that good clinical procedures manage the risks to patients. This requires that the clinical environment is managed to prevent the risks of cross-infection, that the treatment or diagnosis is dealt with by a person with the necessary knowledge, skills and experience, and that a supervisory structure is in place so that chiropodists are appropriately supervised and can refer questions or seek specialist assistance when required. We accept the evidence of Professor West that all the chiropodists are encouraged to operate and work within the scope of their practice and in teams, to recognise their limitations and to seek advice when appropriate.

The progress of the claims for repayment

39. On 9 July 2002 the Appellant wrote to the Respondents claiming that an error had been made in accounting for value added tax on supplies made by unregistered chiropodists which should have been treated as exempt supplies. The Appellant argued that all unregistered chiropodists were supervised by the registered chiropodists and by the senior clinicians. The parties met on 15 July 2002 and on 21 November 2002 the Appellant sent to the Respondents a voluntary disclosure identifying the sum of £734,656 as value added tax overpaid.
40. Correspondence followed and on 6 June 2003 officers of the Respondents visited the Scholl shop in Watford to see how the business operated and to see the reality of the supervision by the registered staff. On 30 June 2003 the Appellant provided a detailed analysis as to why the services supplied by the unregistered chiropodists should be exempt and also mentioned the regular visits by the senior clinicians, the twice yearly clinical audits together with the supervision provided by the in-branch registered chiropodists.
41. On 1 August 2003 the Respondents wrote to the Appellant discussing the meaning of direct supervision and also the role of the senior clinicians. The letter accepted that the senior clinicians visited the branches on a regular basis and provided clinical advice and guidance to all chiropodists on these visits. They also carried out clinical audits on all chiropodists twice a year. They also sat in on consultations with two patients and provided assistance on the telephone. They also conducted a review of clinical records. However, in the view of the Respondents this did not amount to direct supervision. The letter went on to say that given the qualifications, experience and training undertaken by the unregistered chiropodists no supervision was required; that no evidence had been provided that anyone was contractually required to provide supervision; and that no evidence had been provided that the supervisor had any say in the level of care provided.
42. The Appellant appealed against the Respondents' decision of 1 August 2003 and that is the first disputed decision the subject of this appeal. The appeal came on for hearing on 22 June 2004. The sole issue at that hearing was whether the unregistered chiropodists were directly supervised by registered chiropodists. The hearing on 22 June 2004 was abandoned at the Appellant's request. The hearing was re-listed on 15 March 2005 but then adjourned because the Appellant had put forward the further argument about the Sixth Directive. On 22 March 2005 the Appellant submitted a supplementary voluntary disclosure for the sum of £655,944 for the period from July 2002 to February 2005. This claim was refused by the Respondents on 3 June 2005 and the Appellant appealed against that decision on 7 June 2005. That is the second disputed decision the subject of this appeal.
43. In the light of our findings of fact we now consider separately each of the issues for determination in the appeal.

Issue (1) – Were the unregistered chiropodists directly supervised?

44. The first issue in the appeal is whether the services of unregistered chiropodists supplied by the Appellant were exempt under the 1994 Act and, in particular, whether such services were directly supervised by a person who was registered within the meaning of Note (2) of Group 7 of Schedule 9.

The arguments

45. For the Appellant Mr Sherry argued that in all but two locations the unregistered chiropodists were directly supervised on the premises by registered chiropodists and that all the chiropodists were directly supervised by the senior clinicians. He went on to argue that the appropriate degree of supervision depended upon the level of risk and that the qualifications, experience and training of the unregistered chiropodists meant that the level of supervision they required was not high; the supervision given was sufficient. The Respondents had accepted that, because of their qualifications, experience and training, the unregistered chiropodists did not require supervision and it would be odd if there were no exemption in such a case.
46. Mr Sherry cited Maloney v A Cameron Limited [1961] 2 All ER 934 and Owen v Evans and Owen (Builders) Limited [1962] 3 All ER 128 at 131 H-I for the principles that direct meant not through a third party and that supervision meant the appropriate level of supervision depending upon the circumstances of the case. He also relied upon the decisions of the tribunal in Elder Home Care Limited v The Commissioners of Customs and Excise (1993) Decision No. 11185; Easyway Productions Limited v The Commissioners of Customs and Excise (1997) Decision No.14938; and Anthony John Land trading as Crown Optical Centre v The Commissioners of Customs and Excise (1998) Decision No. 15547 at paragraphs 27, 28 and 29. Mr Sherry also referred to an extract from Customs and Excise Manuals dated 13 June 2004 TA 1/96 which considered the meaning of direct supervision after the Tribunal Decision in Elder Care Homes.
47. For the Respondents Ms Neenan argued that the unregistered chiropodists employed by Scholl were not directly supervised by registered chiropodists. There was no statutory definition of the phrase "directly supervised" and the proper approach was to consider whether, in all the circumstances of the case, the words of the statute, as a matter of the ordinary usage of the English language, applied to the facts as found, following the principle established in Brutus v Cozens [1973] AC 854 at 861. In particular, Ms Neenan argued that neither the senior clinicians nor the in-branch registered chiropodists provided direct supervision. Some of the senior clinicians had allowed their registrations to lapse and, in any event, the senior clinicians performed chiropody services themselves and so the time available for them to supervise other chiropodists was short. Further, there were no measures which were specific to the unregistered chiropodists; the senior clinicians had no say in the level of care provided to individual customers; they did not see the customers of the chiropodist they were observing prior to treatment; and all they provided was low level monitoring of the work of the chiropodists for the purpose of commercial quality control.
48. Turning to the in-branch registered chiropodists, Ms Neenan argued that their supervision was only relied upon as an adjunct to that of the senior clinicians; there was no identification of the registered chiropodists as supervisors; there were branches with no registered chiropodists; there were no written procedures requiring the registered chiropodists to provide supervision or requiring the unregistered chiropodists to seek it; each chiropodist had his or her own practice and no supervisor had a say in the level of care provided; no extra remuneration was given to the registered chiropodists for supervisory duties; the goal for all chiropodists was full booking which would not facilitate supervision; there was no evidence that registered chiropodists reported any problems to the senior clinicians; given the qualifications, training and experience of the unregistered chiropodists supervision might not be required; and the only contact between the registered and unregistered chiropodists were requests for assistance and advice irrespective of whether the colleague who was asked for advice was registered or unregistered.
49. Ms Neenan relied upon the decisions of the Tribunal in Carragh Pittam v The Commissioners of Customs and Excise (1995) Decision No 13268; A & S Services v The Commissioners of Customs and Excise (1999) Decision No.16025; Personal Assistance (UK) Limited v The Commissioners of Customs and Excise (2002) Decision No.17649; Allergycare (Testing) Limited v The Commissioners of Customs and Excise (2002) VAT Decision No. 18026; and Take Care (Agency Services) Limited v The Commissioners of Customs and Excise (2003) Decision No. 18041.

Reasons for decision

50. In considering the arguments of the parties we first refer to the authorities cited to us to see what principles they establish.
51. Maloney (1961) concerned the meaning of the phrase "immediate supervision" in building regulations. The Court of Appeal held that the proper extent of supervision was a question of degree related to the structure being built and the difficulties and dangers involved. The word "immediate" was directed to responsibility and did not indicate that in all cases every act had to be supervised closely; in that case the workmen were competent and there was no great danger or difficulty and the regulations had not been breached. Owen (1962) also concerned the meaning of the phrase "immediate supervision" in building regulations. The Court of Appeal held at page 130 that "immediate" did not mean constant, unremitting supervision but meant that the supervision must be direct, namely that there should not be any intermediary between the person supervising and the person being supervised. The degree of supervision depended upon the circumstances of the case; if every move was fraught with danger then supervision of the most constant kind might be required.
52. From these authorities we derive the principles that "direct" means not through a third party and "supervision" means the appropriate level of supervision depending upon the circumstances of the case; the proper extent of supervision is a question of degree and relates to the level of risk. Direct supervision does not have to be constant, unremitting supervision.
53. Applying those principles to the facts of the present appeal we first record that we do not see the role of the clinical auditor as amounting to supervision. As far as the supervision provided by the in-branch registered chiropodists and the senior clinicians are concerned, this supervision was provided by Scholl and not through a third party and so was direct. As far as the appropriate level of supervision is concerned we have considered all the circumstances, including the circumstance accepted by the Respondents that given the qualifications, training and experience of the unregistered chiropodists supervision was not required. We have also considered the evidence of Professor West. In evidence which we accept Professor West expressed the view that the Scholl system of supervision provided appropriate support for all registered and unregistered chiropodists. Supervision was provided by ensuring that all chiropodists could seek support and advice from their peers and seniors and that meant that there was appropriate support for the level of case bearing in mind the level of risk. Scholl's customers were mostly fit, healthy adults and the procedures carried out by Scholl were relatively minor. The system of supervision was fit for its purpose. We adopt those views.
54. We have approached the Tribunal decisions cited to us with the views of the Court of Appeal in Customs and Excise Commissioners v Ferrero UK Ltd [1997] STC 881 in mind. At 884b Lord Woolf MR said;

"I do urge tribunals when considering issues of this sort [that is, issues of fact] not to be misled by authorities which are no more than authorities of fact into elevating issues of fact into questions of principle when it is not appropriate to do so on an inquiry such as this."

55. And later at 884f he said:

"Counsel who was representing the commissioners cited eight previous cases before the tribunal. I have not had the advantage of reading those eight cases, but I have seen something of their contents from passages in the tribunal's decision. It appears that most of those cases could be cases on their own facts. They should not be regarded as creating principles of law which are going to help on cases where the facts are different on an issue of this sort which is one of fact and degree."

56. In our view issue (1) in this appeal is an issue of fact and the tribunal decisions cited to us are no more than authorities of fact and do not, therefore, establish principles which we must follow. In Easyway (1997) in paragraph 24 of its decision the tribunal decided that it was not necessary to identify each of the factors which constituted direct supervision and then to decide whether the appellant complied with each factor; whether or not there was direct supervision in any one case was a matter of fact and degree.
57. We conclude that, where an unregistered chiropodist worked in the same branch with a registered chiropodist, and worked in a branch which was visited by a senior clinician who was registered, the services of that unregistered chiropodist were directly supervised by a person who was registered within the meaning of Note (2) of Group 7 of Schedule 9.to the 1994 Act and those services were, therefore, exempt.

Issue (2) – the Sixth Directive.

58. The second issue for determination in the appeal is whether the services of the unregistered chiropodists were exempt under Article 13A1(c) of the Sixth Directive. As well as being an alternative argument to issue (1) (which applies to all the unregistered chiropodists) this issue is also of relevance to those unregistered chiropodists who did not work with a registered chiropodist, or who worked in a branch which was not visited by a senior clinician who was registered.

The arguments

59. For the Appellant Mr Sherry argued that the Appellant was entitled to rely upon the direct effect of the Sixth Directive where a discretion which had been conferred on a member state had been exercised in a way contrary to the general principles of the Community. The way in which the United Kingdom had implemented Article 13A1(c) contravened the principle of fiscal neutrality which precluded a different treatment for value added purposes of similar services which were in competition with each other. At the relevant time the registered and unregistered chiropodists had done the same work, had the same job title and were paid the same. When the unregistered chiropodists became registered under the 2001 Order on the grounds of experience they remained the same people but then became registered. Their services were not only similar but identical and there was no change in the supply to the customer. A failure to exempt their supplies would give rise to distortions of competition because the supplies of registered chiropodists were exempt when those of unregistered chiropodists were not. Mr Sherry argued in the alternative that the United Kingdom legislation was sufficiently ambiguous as to lead to the conclusion that it should be interpreted in accordance with the principle of fiscal neutrality and Item 1(c) of Group 7 should be read so that registration was not a condition of exemption and that exemption should also apply to services of a kind supplied by a registered chiropodist even if supplied by an unregistered chiropodist. .
60. Mr Sherry cited: paragraph 3 to the preamble to the First VAT Directive (967/227/EEC); Ursula Becker v Finanzamt Münster-Innenstadt (Case 8/81) [1982] ECR 53 at paragraph 25; Sabine von Colson and Kamaan v Land Nordrhien -Westfalen (Case 14/83) [1984] ECR 1891; Gemeente Emmen v Belastingdienst Grote Ondernemingen (Case C-468/93) [1996] STC 496; Lange v Finanzamt Fürstenfeldbruck (Case C-111/92) [1997] STC 564 at paragraph 16; Goldsmiths (Jewellers) Limited v Customs and Excise Commissioners (Case C-330/95) [1997] STC 1073 at paragraph 28 of the Opinion of the Advocate General; Gregg v Commissioners of Customs and Excise (Case C-216/97) [1999] STC 934 at paragraphs 19 and 20 of the judgment; Ambulanter Pflegedienst Kügler GmbH Finanzamt für Körperschaften I in Berlin (Case C-141/00 ) judgment of 10 September 2002 at paragraphs 29 and 30; Christophe-Dornier-Stiftung für Klinische Psychologie v Finanzamt Giessen (Case C-45/01) judgment of November 2003 [2005] STC 228; Finanzamt Gladbeck v Edith Linneweber (Case C-453/02) judgment of 17 February 2005 at paragraph 24; Fischer v Finanzamt Donaueschingen (Case C-283/95) [1998] STC 708 at paragraph 27 of the judgment; and the Opinion of the Advocate-General in H A Solleveld v Staatsecretaris van Financiën Case C- 443/04 published (in French) on 15 December 2005
61. For the Respondents Ms Neenan argued that Article 13A1(c) could not be of direct effect; the principle of direct effect meant that private parties could rely upon the directive in national courts even if it was not implemented by national legislation so long as the provisions of the directive were unconditional and sufficiently precise (Becker). Article 13A1(c) was not unconditional because the definition of medical or paramedical professions was left to the member states. The Court of Justice would not provide its own definition (Gemeente Emmen). Ms Neenan went on to argue that Christophe-Dornier-Stiftung did not decide that Article 13A1(c) had direct effect; the issue there was whether the exemption applied to both employees and to self-employed persons. The Court of Justice had followed Ambulanter and held that the exemption was not dependent upon the legal form of the taxable person making the supplies. Ms Neenan relied upon J R Barkworth v Customs and Excise Commissioners [1988] 3 CMLR 759 for the principle that the United Kingdom had properly exercised its discretion in defining the medical and paramedical professions. She also relied upon the opinion of the Advocate General in Kingscrest v Customs and Excise Commissioners (Case C-498/03) [2005] STC 1547 for the principle that the requirement of registration was reasonable, objective and proportionate. She also referred to Yusupoff v Commissioners of Customs and Excise (2003) VAT Decision 18152.
62. Turning to the principle of fiscal neutrality Ms Neenan argued that the principle targeted unimportant and unjustified distinctions (see paragraph 28 of the Opinion of the Advocate General in Goldsmiths Jewellers). In this appeal there were important and justified distinctions between registered and unregistered chiropodists in terms of their training, skill and regulation. Unregistered and unsupervised chiropodists did not possess the necessary professional qualifications (Ambulanter paragraph 27). There were important differences between the length and content of the training undergone by registered chiropodists on the one hand and unregistered chiropodists on the other and there were also differences in regulation; also there were some treatments which could only be given by a registered chiropodists. Ms Neenan relied upon Christiane Urbing-Adam v Administration de l'enregistrement et des domaines (Case C-267/99) judgment of 11 October 2001 for the principle that the liberal professions were marked by intellectual character, high-level qualification , clear and strict professional regulation, a personal element in the activity and a high level of independence. She also relied upon Commission v France Case C-481/98 [2001] STS 919. The distinction was not made on the grounds of the legal status of the person providing the service as in Gregg, Ambulanter and Christophe-Dornier- Stiftung nor on the question whether the services were licensed or not as in Lange, Fischer and Gladbeck. Finally Ms Neenan relied upon paragraphs 60 and 61 of the Opinion of the Advocate General in Matthias Hoffman (Case C-144/00) judgment of 3 April 2003 for the principle that activities which may be similar but are not exactly the same could be treated differently. Finally Ms Neenan argued that the exemptions had to be strictly construed.

Reasons for decision

63. In considering the arguments of the parties we first consider the authorities cited to us to see what principles they establish.
64. In 1967 the third preamble to the First Directive referred generally to the need to achieve harmonisation of legislation concerning turnover taxes so as to eliminate as far as possible factors which could distort conditions of competition whether at national or Community level. In Ursula Becker (1982), in paragraph 25 of its judgment, the Court of Justice established the principle that wherever the provisions of a directive are unconditional and sufficiently precise those provisions may, in the absence of implementing measures, be relied upon as against any national provision which is incompatible with the directive. Van Colson (1984), at paragraph 28 of the judgment, established the principle that it is for national courts to interpret and apply national legislation, adopted for the implementation of a directive, in conformity with the requirements of Community law in so far as the national court is given discretion to do so under national law. These are general principles which are binding on us.
65. Barkworth (1988) was a judgment of the High Court and the issue was whether the services of an osteopath were exempt under Article 13A1(c). Osteopaths had not been defined by the United Kingdom as a profession or paramedical profession for the purposes of Article 13A1(c). The High Court held that the United Kingdom had properly exercised its discretion as to how to define the medical and paramedical professions for the purposes of Article 13A1(c). As a judgment of the High Court that authority is binding on us. However, the decision in Barkworth was given before the many judgments of the Court of Justice to which we were referred. If the later judgments of the Court of Justice clarified the judgment in Barkworth we should prefer those later judgments. However, it will be seen that we are of the view that we are still bound by the judgment in Barkworth.
66. Lange (1993) did not concern the application of Article 13 of the Sixth Directive but of Article 15 which concerns exports from the Community. The issue was whether exports to countries which were prohibited by national law were exempt. The Court of Justice held that the principle of tax neutrality precluded a differentiation between lawful and unlawful transactions except in special circumstances. Further, Article 15 did not distinguish between lawful and unlawful exports and so both were to be treated in the same way. We do not consider that the judgment in Lange is of assistance in this appeal. At the time of the claim the subject of this appeal the services of both registered and unregistered chiropodists were lawful. The different value added tax treatment arose from a specific provision in the Sixth Directive which was not considered in Lange.
67. Gemeente Emmen (1996) did not concern Article 13A1(c) of the Directive but Article 13B the opening words of which, like Article 13A, provide that member states shall exempt stated supplies "under conditions which they shall lay down for the purposes of ensuring the correct and straightforward application of the exemptions and of preventing any possible evasion, avoidance or abuse". The exemption at issue in Gemeente Emmen was that in Article 13B(h) which was "the supply of land which has not been built on other than building land as described in Article 4(3)(b)". Article 4(3)(b) provides that building land shall mean any unimproved or improved land defined as such by the member states. In paragraph 19 of its judgment the Court of Justice decided that the conditions referred to in the opening words of Article 13B could not define the contents of the exemptions. However, in paragraph 20 the Court of Justice held that the effect of Article 4(3)(b) was that it was for member states to define building land. In paragraph 22 the Court stated that where, in the legislation, there was an implied reference to national usage, it was not for the Court to give a uniform Community definition to the terms employed. At paragraph 25 the Court stated that the exemptions provided for in Article 13 had their own independent meaning in Community law and so the member states could not alter their content by laying down conditions for their application but that that general rule did not apply where the legislation specifically conferred the task of defining the terms of an exemption on the member states, provided that they complied with the objectives of Article 13.
68. From that authority, therefore, we derive the principle that the opening words of Article 13A do not permit member states to define the content of the exemptions. However, if the legislation specifically confers the task of defining an exemption on the member states, that is a matter for the member states. In this appeal Article 13A1(c) does specifically confer on the member states the right to define the medical and paramedical professions to which the exemption applies. The United Kingdom has done that in a way which complies with the objectives of Article 13. We should, therefore, be reluctant to interfere with the way in which the implementation has taken place.
69. Goldsmiths Jewellers (1997) did not concern Article 13 of the Sixth Directive but rather Article 11 which deals with consideration; the issue was whether bad debt relief should be allowed where a consideration was payable in kind rather than in money. At paragraph 28 of his Opinion the Advocate General referred to the principle of fiscal neutrality which required equal treatment for different economic activities in order to avoid distortions of the value added tax system by the drawing of unimportant and unjustified distinctions. The principle of fiscal neutrality was derived from the need to ensure that economic activities were treated equally and to ensure that the common system of value added tax was not distorted by irrelevant or illegitimate distinctions. Mr Sherry argued that if the services supplied by unregistered chiropodists were standard-rated and those supplied by registered chiropodists were exempt then different levels of value added tax would be payable for the same services.
70. We first note that Goldsmiths Jewellers did not concern an exemption where the task of defining it had been delegated to the member states. However, it did refer to the principle of fiscal neutrality in order to avoid distortions of the value added tax system by the drawing of unimportant and unjustified distinctions. In our view the differences, at the time of the period covered by the Appellant's claims, between unregistered and registered chiropodists were not unimportant or unjustified. Article 13A defines the exemptions for certain activities in the public interest. It is clearly in the public interest that the provision of medical care should be regulated by, in this case, registration. Article 13A1(c) refers to the medical and paramedical professions. A profession is a calling which requires training, qualification and regulation. The registered chiropodists had all these but the unregistered chiropodists did not. Also, the work which a registered chiropodist could do was different from that which an unregistered chiropodist could do. Although in a Scholl shop there would be many similarities, the fact remains that, looking at the profession as a whole, including practice within the National Health Service, there were serious differences between those procedures which could be carried out by a registered chiropodist and those which could be carried out by an unregistered chiropodist.
71. Fischer (1998) concerned the exemption in Article 13B(f) of the Sixth Directive for betting, lotteries and gambling. National law provided for a system of licensed casinos where supplies were exempt but the issue was whether the unlawful operation of games of chance was also exempt. The Court of Justice held that, even though Article 13B allowed member states to apply conditions for the purpose of preventing evasion, avoidance or abuse, they were not authorised to undermine the exemption and so could not reserve the exemption solely to lawful games of chance. This authority follows the first principle established in Gemeente Emmen, that the opening words of Article 13A do not permit member states to define the content of the exemptions. However, this authority does not undermine the second principle in Gemeente Emmen that, if the legislation specifically confers the task of defining an exemption on the member states, that is a matter for the member states. Fischer also confirms the principle in Lange that lawful and unlawful transactions should generally be treated in the same way; however in this appeal there were no unlawful transactions.
72. Gregg (1999) concerned the exemptions in Articles 13A1(b) and (g) for medical care and services closely linked to welfare and the issue was whether the exemptions applied to services supplied by a partnership which was not a legal person in United Kingdom law. In holding that such supplies were exempt, the Court of Justice, at paragraphs 19 and 20 of its judgment, referred to the principle of fiscal neutrality which precluded economic operators carrying on the same activities from being treated differently as far as value added tax was concerned. At paragraph 29 of his Opinion, the Advocate General referred to the principle of tax neutrality which meant that supplies of the same kind should in principle be taxed in the same way. However, that is not the same as saying that, where the legislation gives member states a discretion to define which professions are to be exempt, all similar (but not identical) activities should also be exempt. We note that in Gregg the principle of fiscal neutrality was applied to economic operators but the legal personality of the suppliers of services is not an issue in this appeal.
73. Christiane Urbing-Adam (2001) concerned the transitional provisions in Article 28(3)(b) of the Sixth Directive which provided that during the transitional period member states could continue to exempt the activities in Annex F under conditions existing in the member states. Annex F2 referred to services supplied by the liberal professions. Mrs Urbing-Adam was a managing agent of buildings and argued that that was a liberal profession. The Luxembourg court was of the view that it was not and the Court of Justice was asked for its views. In paragraph 35 of its judgment the Court of Justice held that the definition was a matter for the member state concerned but went on, in paragraph 36, to state that, in exercising that power member states must respect the principle of fiscal neutrality; that principle precluded the treatment of supplies of similar goods or services, which were in competition with each other, differently for the purposes of value added tax and so those goods or services had to be subject to a uniform rate. The Court, in paragraph 39 of its judgment, stated that the factors which characterised a liberal profession within the meaning of Annex F were activities which were of a marked intellectual character, which required a high-level qualification and which were usually subject to clear and strict professional regulation.
74. We note that the words of Article 13A1(c), which apply in this appeal, also refer to "professions" from which we deduce that the legislation intends to differentiate between activities of an intellectual character with a qualification and regulation on the one hand and other activities on the other. Accordingly, in our view, in exercising its discretion under the Article to define the medical and paramedical professions the United Kingdom was entitled to distinguish between callings with training, qualification and regulation on the one hand and other activities on the other.
75. In Commission v France (May 2001) France had introduced a lower rate of value added tax on medicinal products re-imbursable under its social security system whereas other medicinal products were taxed at a higher rate. The Court of Justice held that the medicinal products taxed at the lower rate were defined by objective criteria and that, even if two medicinal products had the same curative or preventative effect, one might be re-imbursable and the other not. That was in accordance with Community law as the two products were not similar and in competition with each other and so the reduced rate did not have the effect of favouring the sale of the lower-rated product. The difference in rate did not infringe the principle of fiscal neutrality.
76. In this appeal the services supplied by registered chiropodists on the one hand and the services supplied by unregistered chiropodists on the other were defined by objective criteria (training and qualification leading to registration and regulation). Because of this background, and of the fact that only a registered chiropodist could carry out certain procedures, the two services were not similar.
77. Ambulanter Pflegedienst Kügler (2002) also concerned the interpretation of Article 13A1(c) and (g) and a company which ran an out-patient care service. The issues relevant to this appeal were whether the exemption could only apply where the medical care was provided by an individual or whether it also extended to supplies independent of the legal form, and whether, if the exemption also applied to companies, it covered all care provided by qualified nurses. In answering the first question the Court of Justice, at paragraph 25 of its judgment, stated that the exemptions constituted independent concepts of Community law which had to be placed in the general context of the common system of value added tax. At paragraphs 29 and 30 the Court held that the exemption of medical services supplied by legal persons was consistent with the principle of fiscal neutrality inherent in the common system of value added tax and that the principle of fiscal neutrality precluded economic operators carrying on the same activities from being treated differently as far as levying value added tax was concerned. It followed that the exemption did not depend on the legal form in which the taxable person made the supplies.
78. Once more we note that the principle of fiscal neutrality was applied to economic operators and, in this appeal, there is no issue about which legal persons make the supplies as all the chiropodists, registered and unregistered, are individuals.
79. Matthias Hoffmann (2003) concerned the exemption in Article 13A1(n) which exempted certain cultural services supplied by bodies governed by public law or by other cultural bodies recognised by the member state. The issue was whether the exemption applied to the services of three solo singers. In paragraph 19 of its judgement the Court of Justice stated that the wording and purpose of Article 13A1(n) indicated that only certain cultural services could be exempted from value added tax; that those services had to be supplied by specific bodies; and that member states had a discretion which bodies they recognised. In paragraph 21 the Court said that the discretion of member states must be taken into account and that meant that national law could exclude individual artists from the exemption. The principle of fiscal neutrality did not exclude this and there was no distortion of competition because the services of soloists and of choirs, orchestras or chamber music ensembles were very different.
80. In our view this authority supports the view that, where member states are given a discretion (as they are in Article 13A1(c)), it is not excluded by the principle of fiscal neutrality.
81. Christophe-Dornier-Stiftung (2003) concerned Article 13A(1)(b) and (c) and the issue was whether a private clinic with an outpatient facility, where patients were given treatment by qualified psychotherapists who were not doctors, was entitled to the exemption. The issues relevant to this appeal were whether the services were exempt even if supplied by employees (it was agreed that they would be exempt if supplied by self-employed persons) and whether Article 13A(c) had direct effect. At paragraphs 44 and 45 the Court of Justice held that the principle of fiscal neutrality precluded economic operators carrying on the same activities from being treated differently as far as the levying of value added tax was concerned. However, at paragraph 48 the Court went on to say that the objective of the exemption was to reduce healthcare costs. The services covered by that term in Article 13A1(b), like those covered by the provision of medical care in Article 13A1(c), must have as their purpose the diagnosis, treatment and, as far as possible, cure of diseases or health disorders and have a therapeutic purpose. At paragraphs 80 and 81 the Court of Justice held that the provisions of Article 13A(1)(c) indicated in a sufficiently unconditional manner the activities to which the exemption applied and the fact that member states had a discretion to determine for which paramedical professions the exemption applied did not prevent individuals who, according to objective criteria, provided treatment envisaged by the exemptions, from relying directly on the provisions of the Directive.
82. In our view, according to objective criteria, the unregistered chiropodists did not provide treatment as envisaged by the exemption in Article 13A1(c). Their training did not encompass, to the same extent as the training of the registered chiropodists, the diagnosis, treatment and cure of diseases or health disorders. We also note that in Christophe-Dornier-Stiftung at paragraphs 50 and 51 the Court of Justice emphasised that the treatment the subject of the exemption had to be given by qualified persons.
83. Finanzamt Gladbeck (2005) concerned the exemption from value added tax in Article 13B(f) of the Sixth Directive for betting, lotteries and other forms of gambling "subject to conditions and limitations laid down by each member state". The Court of Justice ruled that national legislation could not restrict the exemption to licensed public casinos and that the exemption should also be extended to other traders who operated the same activity; Article 13B(f) had direct effect and could be relied upon by operators of games of chance before national courts. At paragraph 24 of its judgment the Court of Justice affirmed that, in exercising the power to lay down conditions, member states must respect the principle of fiscal neutrality which precluded the treatment of similar supplies, which were in competition with each other, differently for the purposes of value added tax.
84. We note that article 13B(f) refers to conditions and limitations laid down by the member states and does not give the member states a discretion to define as in Article 13A1(c). Accordingly, Gladbeck affirms the principles in Gemeente Emmen that the power to lay down conditions does not permit member states to define the content of the exemptions but that, if the legislation specifically confers the task of defining an exemption on the member states, that is a matter for the member states.
85. Kingscrest (May 2005) concerned Article 13A1(g) and (h) which exempted certain supplies if made by "bodies governed by public law or by other organisations recognised as charitable by the member state". In implementing this provision the United Kingdom exempted the supply of services by a charity, a state-regulated private welfare institution or a public body. One issue was whether this form of implementation, which included a state-regulated private welfare institution, exceeded the discretion given by the Article. The Court of Justice held that it was for the national court to determine, having regard to the principle of fiscal neutrality, whether the implementation of the United Kingdom exceeded the discretion given to member states in the directive.
86. We are of the view that, in implementing the provisions of Article 13A1(c), the United Kingdom has not exceeded the discretion given by that Article.
87. The Opinion of the Advocate General in Solleveld (2005) was only available in French at the time of the hearing but we were provided with an unofficial translation by the Appellant. The case concerns Article 13A1(c).and the definition of a paramedical profession. Mr Solleveld was a state recognised physiotherapist but provided certain treatment which was not part of the activities of a physiotherapist. Mr van den Hout-van Eijnsbergen was a psychotherapist and that was not a profession recognised by the Netherlands (although the professions of psychologists and psychiatrists were recognised). The case of Mr van den Hout-van Eijnsbergen is relevant to this appeal. The issue in both appeals was whether the services were exempt. At paragraph 22 the Advocate General stated that it is the member states who define the medical and paramedical professions to which the exemption applies. He goes on to say that member states must respect the objectives and general principles of Community law and, if they do so, private individuals cannot assert rights against the implementation. At paragraph 38 the Advocate General states that the social objective of the exemption must be taken into account because the services should remain accessible to the community without being made more expensive by value added tax. At paragraphs 39 to 41 he states.

"39. The national legislator, therefore, should not excessively enlarge the circle of the paramedical professions benefiting from a favourable tax system and can only include within it those professional categories whose members are qualified to carry out medical and paramedical services. As quite rightly pointed out by the Commission and the Dutch government, the general interest, in effect, exclusively concerns exemption of the provision of medical services carried out by qualified persons. .

It follows from the principle of equality of treatment that members of different professional categories should receive identical tax treatment in so far as they possess a similar qualification in respect of certain activities. …

The court to which the case is referred … should therefore examine … whether a psychotherapist … who has a training such as that of the plaintiff, holds the same qualification as a psychiatrist and a psychologist for the provision of psychotherapy services."

88. We note the emphasis laid by the Advocate General on qualifications and training. In this appeal the unregistered chiropodists did not have the same qualifications and training as the registered chiropodists and that confirms our view that the exemption should be confined to registered chiropodists. When dealing with the case of Mr Solleveld, at paragraph 58, the Advocate General repeats that the objective is that a service is only exempt when it is provided by a person qualified in general for the purpose. At paragraph 61 he states that services that are provided by untrained persons on the one hand and services provided by person appropriately qualified on the other cannot, as a general rule, be similar. That means that the principle of fiscal neutrality does not apply. .
89. We conclude that the services of the unregistered chiropodists are not exempt under Article 13A1(c) of the Sixth Directive.

Decision

90. Our decisions on the issue for determination in the appeal are:

(1) that where an unregistered chiropodist worked in the same branch with a registered chiropodist, and worked in a branch which was visited by a senior clinician who was registered, the services of that unregistered chiropodist were directly supervised by a person who was registered within the meaning of Note (2) of Group 7 of Schedule 9.to the 1994 Act and those services were, therefore, exempt and

(2) that the services of the unregistered chiropodists were not exempt under Article 13A1(c) of the Sixth Directive.

91. The appeal, so far as it relates to the first issue, is, therefore, allowed but so far as it relates to the second issue is dismissed.
92. This is a decision in principle. We leave it to the parties to agree the amount of the repayments bearing in mind that we do not consider that the exemption applies to the services of unregistered chiropodists who were not working in the same branch as a registered chiropodists and who were not supervised by senior clinicians who were registered. We regard both elements of the supervision to be required.
93. In this connection we record the concession of the Respondents made at the hearing that if a registered chiropodist's registration had lapsed for purely administrative reasons, and could be re-instated and back dated, then the Respondents accepted that the services of an unregistered chiropodist supervised by such a registered chiropodist could be given the benefit of the exemption. However, if registration had lapsed for some other reason, and registration was not backdated or reinstated, then the services of the unregistered chiropodist supervised by that registered chiropodist could not have the benefit of the exemption.
94. If the parties are unable to agree the amounts of the repayments then they may apply within three months of the date of the release of this Decision for the amounts to be determined by the Tribunal.

Costs

95. The Appellant may apply for a direction as to costs.

DR A N BRICE

CHAIRMAN

RELEASE DATE: 27 March 2006

LON/2003/1048

96. 03.06