»Ê¹ÚÌåÓýapp

»Ê¹ÚÌåÓýapp joint appeals of LIFE Services Ltd and »Ê¹ÚÌåÓýapp Learning Centre (Romford) Ltd were previously reported in Revenue and Customs Brief No 9 (2021)

»Ê¹ÚÌåÓýapp Court of Appeal released its judgment on 25 March 2020. »Ê¹ÚÌåÓýapp Supreme Court subsequently refused leave to appeal on 15 January 2021.

»Ê¹ÚÌåÓýapp cases:

LIFE Services Ltd provided services to individuals under a formal care plan agreed with the local authority, following an assessment of the individual’s needs and the setting of a personal budget for care and support. »Ê¹ÚÌåÓýapp local authority made payments either directly to LIFE Services Ltd, or indirectly, where the individual or carer was managing the budget. »Ê¹ÚÌåÓýapp local authority monitored and inspected the daycare service. It was not regulated by the Care Quality Commission.

»Ê¹ÚÌåÓýapp Learning Centre (Romford) Ltd accepted individuals who had already been assessed by their local authority and had a care plan. Most of its fees came from the local authorities, with parents or carers providing some funding. Its services were not regulated by the Care Quality Commission

»Ê¹ÚÌåÓýapp result of the appeals

»Ê¹ÚÌåÓýapp cases concerned the VAT liability of daycare services provided by private bodies to vulnerable adults in England. »Ê¹ÚÌåÓýapp decisions of the Upper Tribunal were affirmed in both cases. »Ê¹ÚÌåÓýapp UT had decided that

� LIFE Services Ltd was not a state-regulated, private welfare institution or agency

� in both cases, item 9 of Group 7 of Schedule 9 complied with the requirements of fiscal neutrality - in doing so, the UT also decided that devolution arrangements did not mean that item 9 of Group 7 breached the principle of fiscal neutrality

»Ê¹ÚÌåÓýapp position now

This confirmed HMRC’s view that providers must be charities, public bodies or regulated as private welfare institution or agency by the relevant authority in the country concerned, in order to exempt their supply of services under Item 9 of Group 7 of Schedule 9 to the VAT Act 1994. Note (8) to Group 7 of Schedule 9 to the VAT Act 1994 defines ‘state-regulated�, as ‘approved, licensed, registered or exempted from registration by any Minister or other authority pursuant to a provision of a public general Act�.

»Ê¹ÚÌåÓýapp appeals and the Court of Appeal’s judgment on he alleged breach of fiscal neutrality

On the status of LIFE Services Ltd

With regard to whether LIFE Services Ltd is a ‘state-regulated private welfare institution or agency� as defined within item 9 of Group 7 of Schedule 9 to the VAT Act 1994, the Court of Appeal held that:

� what is required is that the institution or agency is ‘approved, licensed, registered or exempted from registration in respect of the supply of welfare services by any Minister or other authority pursuant to a provision of a public general Act�

� the various provisions of law relied on by LIFE Services Ltd were insufficient to satisfy that test, so did not meet the condition.

On the principle of fiscal neutrality

Both LIFE Services Ltd and »Ê¹ÚÌåÓýapp Learning Centre (Romford) Ltd contended that item 9 of Group 7 of Schedule 9 to the VAT Act 1994 contravened the principle of fiscal neutrality, because it:

1. Imposes a differential VAT treatment between charities and other private operators.

2. Entitles charities to exemption whether or not they are devoted to social wellbeing.

3. Causes differential treatment of providers of daycare services between those in England and Wales who are not subject to state regulation and those in Scotland and Northern Ireland who are.

»Ê¹ÚÌåÓýapp Court of Appeal held that:

»Ê¹ÚÌåÓýappre was no breach of the principle of fiscal neutrality because item 9 distinguishes between private welfare bodies that are subject to some form of regulation and those that are not. Charities are not ‘state-regulatedâ€� but are required to be established solely for charitable purposes that are for the public benefit and are subject to supervision by the Charity Commission. »Ê¹ÚÌåÓýapp average consumer would see little relevant difference between services provided by charities and those provided by state-regulated private providers.

»Ê¹ÚÌåÓýappre was also no breach because it is implicit that the exemption only applies to charities who supply welfare services in accordance with the specific charitable purposes specified in their constitutions. Further, item 9 does not itself discriminate between private welfare providers located in the different nations of the UK. It only discriminates between state-regulated providers and non-state-regulated providers. »Ê¹ÚÌåÓýapp reason why certain providers do not qualify as being ‘state-regulatedâ€� is immaterial.

»Ê¹ÚÌåÓýapp court concluded that the services did not meet the terms of Item 9 of Group 7 of »Ê¹ÚÌåÓýapp VAT Act 1994 both before and after the UK‘s exit from the European Union.

»Ê¹ÚÌåÓýapp cases had no impact on providers of daycare services in Scotland and Northern Ireland. provided they are still required to be state-regulated they will continue to benefit from the exemption as long as that position continues.