[2009] UKFTT 87 (TC)
TC00055

FIRST TIER TRIBUNAL
TAX	Reference No: LON 2006/0690 

VAT – EXEMPT SUPPLIES – HEALTH AND WELFARE – Whether Intense Pulse Treatment (permanent removal of unwanted hair) constituted medical or surgical treatment – No – breach of fiscal neutrality – No – Appeal dismissed – Item 4 Group 7 Schedule 9 VAT Act 1994

	JOAN BURKE   	Appellant

	- and -

	HER MAJESTY’S REVENUE and CUSTOMS	Respondents

			Tribunal: MICHAEL TILDESLEY OBE	 (Chairman)
				      RICHARD CORKE FCA (Member)	  

Sitting in public in Bristol on 18 February 2009

Nigel Ferrington VAT consultant for the Appellant

John O’Flaherty counsel instructed by the Solicitor’s office of HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2008

DECISION
The Appeal
1.	The Appellant was appealing against part of an assessment by HMRC in the sum of £10,557 issued on 10 March 2006. The disputed amount was £8,649 which related to output tax assessed on Intense Pulse Light (IPL) treatments provided by the Appellant at the Crystal Springs Health and Beauty Clinic (the Clinic).
2.	The Tribunal heard evidence from the Appellant, and received in evidence witness statements of Mel Prentice and Catherine Edwards who were the Officers who carried out the inspection of the Appellant’s business. Ms Prentice raised the assessment against the Appellant. An agreed bundle of documents was admitted in evidence.
The Dispute
3.	The dispute concerned whether the IPL supplies by the Appellant were exempt from VAT under item 4 group 7 schedule 9 of VAT Act 1994 which provides that
“The provision of care or medical or surgical treatment and in connection with it, the supply of any goods, in any hospital or state regulated institution”.
4.	HMRC accepted that the Clinic was a hospital or state regulated institution because of its registration as a private clinic with the Healthcare Commission. The dispute focussed on whether the Appellant’s supplies of IPL constituted the provision of medical or surgical treatment. 
5.	The European Court of Justice in Peter d’Ambrumenil and Dispute Resolution Services Limited (Case C-307-01) [2004] QB 1179 held that Article 13A of the Sixth Directive did not exempt all the services which might be effected in the exercise of the medical and paramedical professions but only provision of medical care which constituted an independent concept of Community law. That concept did not lend itself to an interpretation which included medical interventions carried out for a purpose other than that of diagnosing, treating and in so far as possible curing diseases or health disorders. HMRC contended that the Appellant failed to demonstrate on the balance of probabilities that the IPL treatment was supplied as part of a treatment programme drawn up by a registered health professional following the diagnosis of a medical condition.
6.	The Appellant also submitted that she was treated differently for the purpose of VAT from doctors who administered IPL treatment.  The Appellant’s supplies were subject to VAT, whereas the doctors supplies were not which breached the principle of fiscal neutrality. HMRC disagreed; doctors were subject to VAT if their IPL supplies were not part of a treatment programme.
7.	The Appellant did not dispute the quantum of the assessment, if the supply of IPL treatment was found to be standard rated for VAT.
The Facts
8.	The Appellant was the sole proprietor of the Clinic. The Appellant was not on a medical register. She qualified 20 years ago as a health and beauty therapist, having undergone a three year course for the International Health and Beauty Therapy Diploma. The course included instruction in anatomy, physiology, nutrition, skin care, manicures and pedicures. The Appellant also had qualifications in anatomy and physiology, functional diagnostic nutrition, electrolysis and the healthexcel system of metabolic typing (nutrition).
9.	The Appellant employed two members of staff, a receptionist and a health and beauty therapist. The Appellant concentrated solely on IPL treatments and nutritional advice. Her health and beauty therapist supplied the traditional beauty treatments.
10.	IPL was a form of laser treatment for the removal of hair which was developed in Denmark by Danish Dermatologic Development. IPL was more effective than traditional methods of hair removal, such as razors, waxes and electrolysis. IPL achieved permanent removal of hair by applying heat to the hair follicle. IPL only worked when the hair was in its growing phases which meant that the treatment was repeated at intervals until all the hairs have been treated in phases. Normally three to six applications of IPL were needed for permanent reduction of hair. 
11.	Following the establishment of the Healthcare Commission under the Care Standards Act, certain procedures using prescribed techniques or prescribed technologies became regulated for the first time. Among these were the use of class 3B and 4 lasers and IPL machines. This lead to establishments such as beauty salons where class 3B and 4 lasers and or IPL machines were used being classified as independent hospitals for the purposes of the Care Standards legislation.
12.	The Appellant was registered with the Healthcare Commission in July 2005 under the category of prescribed techniques, for the removal of unwanted hair using an Intense Pulsating Light source. The Appellant was registered as the sole operator of the machine and could only use IPL for hair removal. The Appellant paid £2,000 per annum for her registration with the Healthcare Commission, and £3,500 per annum for mandatory servicing of the IPL machine.
13.	Under the terms of the registration with the Healthcare commission the Appellant was required to have a statement of purpose and produce a patient’s guide which essentially gave information about the terms and conditions of the services provided, complaints procedures and contact details for the Healthcare Commission. She also made an annual payment of £400 each to a medical adviser and IPL adviser.  The Appellant would use the services of a medical adviser when she had a query about a client’s medical history and her suitability to receive IPL treatment, which was not a regular occurrence. 
14.	The Appellant had to comply with minimum standards set by the Healthcare Commission which included completing a consultation guide and health history of the client. The health history constituted in effect a check list for the purpose of assessing a client’s suitability for laser treatment.  The Appellant supplied the Tribunal with several individual case histories which described the psychological effects of hirsutism, the medical term for unusual hair growth.  Of the case histories supplied, one of them related to a client of the Appellant.  The other cases appeared to be postings on a website for the Channel 4 television programme on   Embarrassing Illnesses.
15.	The Appellant accepted that IPL on its own did not treat or cure the underlying reason for the problem of excess hair growth. IPL simply treated the symptoms by permanently reducing the hair by destroying the hair follicles but not the hormones that caused the hair growth. The Appellant was not medically qualified to carry out a diagnosis of the causes of abnormal hair growth. Under the terms of the Healthcare Commission Registration she was required to attend a course on the safe use of lasers in medical and dental practice. 
16.	The Appellant  agreed with the following statement  in the article Polycystic Ovary Syndrome (PCOS) in the UK Journal of Medical Aesthetics and Anti-Ageing produced by the Appellant:
“Women with hirsutism, other manifestations of hyperandogenism and irregular periods may have PCOS. There is wide variation in constitutive body hair growth among different ethnic groups. This variation, along with facial and body hair distribution, requires an objective measure for diagnosis and monitoring of the effects of intervention on treatment”.
17.	The Appellant supplied a letter from Godfrey Town of GCG Healthcare Limited dated 25 September 2006. Mr Town acted as the Laser Protection Adviser to the Appellant.  He stated that the IPL treatments administered at The Franklynn Cosmetic Laser Centre were zero-rated for VAT purposes. Mr Town, however, acknowledged that the IPL was used on occasions for cosmetic treatments as well as for many treatments which were defined to be of a medical nature. 
18.	 The Appellant confirmed that doctors did not specifically refer patients to her for IPL treatment as part of a treatment programme. The Appellant believed that clients approached her because they could not get IPL treatment on the National Health Service. She denied that she ever gave IPL treatment for cosmetic purposes.
19.	The Appellant considered that she operated in the same way as medical practitioners supplying IPL treatment. According to the Appellant her consultation forms were similar to those completed by a doctor who operated in another laser-light clinic.  The Appellant carried out a survey of websites and adverts of doctors who offered IPL treatment and could find no reference to the doctors dealing with the hormone imbalances which was the cause of the abnormal hair growth.
Reasons for the Decision
20.	The Appellant to qualify for exemption under item 4 group 7 schedule 9 of the VAT Act 1994 had to establish on the balance of probabilities that her supplies of IPL treatment met two requirements. The first was that the supply must be the provision of care or medical or surgical treatment. The second, that the supply was made in any hospital or state regulated institution.  HMRC accepted that the Appellant satisfied the second requirement because the Clinic was registered with the Healthcare Commission for the provision of IPL treatments. HMRC contested the applicability of the first requirement to the Appellant. The mere fact that the Appellant made supplies from “a hospital” did not automatically characterise those supplies as medical care.
21.	 The European Court of Justice in Peter d’Ambrumenil re-affirmed that medical care in European Jurisprudence was an independent concept of Community law. The Court of Justice confirmed that only those medical interventions which were carried out for the purpose of diagnosing, treating and in so far as possible curing diseases or health disorders qualified for exemption from VAT. The Court of Justice also added that medical services effected for prophylactic purposes may also benefit from the exemption. Thus for the Appellant to succeed in this Appeal she had to show that her supplies of IPL treatment were for therapeutic or preventative purposes.
22.	The Appellant’s case rested on the proposition that she was treating excessive hair growth which was caused by a medical disorder, most likely a hormone imbalance. The Appellant adduced no expert evidence in support of her assertions about the causes of excessive hair growth. The Appellant was not a qualified medical practitioner, and not in a position to give expert evidence in her own right. Essentially the evidence on the medical causes of excessive hair growth consisted of the Appellant’s enquiries with other practitioners and searches of websites and journals. The outcome of these enquiries did not wholly support the Appellant’s proposition. Mr Town of GCG acknowledged that IPL treatment was used for cosmetic purposes, as well as for medical purposes.  The article on Polycystic Ovary Syndrome (PCOS) recognised a range of different causes for variations in hair growth which was not restricted to medical disorders.
23.	The Appellant’s case was weakened yet further by her failure to demonstrate on the evidence that the IPL treatments administered by her were for medical purposes. The Appellant supplied one case study from her client file, which was very distressing to read but the client received the all-clear in respect of the potential medical causes for the embarrassing hair growth.  The Appellant produced copies of several health history questionnaires completed by her clients. The questionnaires, however, did not constitute medical diagnoses. They were simply checklists to ensure that the clients received no adverse effects from the application of IPL treatment. Likewise the medical adviser assigned to the Appellant as a result of her registration with the Healthcare Commission did not carry out medical diagnoses of the Appellant’s clients. The medical adviser’s role was to provide an additional safeguard if the Appellant had doubts about the suitability of IPL for particular clients. The Appellant accepted that doctors did not refer their patients to her as a part of specific course of medical treatment. The Appellant was not medically qualified to perform medical diagnoses of her clients. The reality was that the Appellant did not know and was not qualified to find out whether her clients needed IPL treatment for a medical condition. Her denial that she never gave IPL for cosmetic purposes rang hollow in the light of the evidence heard.
24.	 The Appellant accepted that IPL treatment on its own did not treat or cure the underlying medical problem, if there was one, for excessive hair growth. IPL simply treated the symptom not the cause. The Appellant’s admission undermined her case that the IPL treatment was applied for therapeutic purposes.
25.	The Tribunal finds that the Appellant has adduced no persuasive evidence to bring her supplies of IPL treatment within the terms of the exemption from VAT for medical services. She failed to establish medical disorders were the sole cause for variations in hair growth. Further the Appellant could not prove with any certainty that the IPL treatments administered by her were for medical and not for cosmetic purposes. Finally she accepted that IPL did not treat the health disorder only the symptoms. In short the Appellant has not demonstrated that her supplies of IPL were for therapeutic or prophylactic purposes.
26.	The Appellant’s subsidiary argument that she was being treated unfairly which breached the principles of fiscal neutrality was equally without evidential foundation. Her evidence of registered medical practitioners making zero-rated supplies of IPL lacked substance and rigour. The evidence comprised  an uncorroborated conversation with a clinic from which a doctor supplied IPL treatments, and searches of websites and adverts which were not produced at the hearing. The Tribunal on the evidence could not be satisfied that the doctors were in fact supplying the same services as the Appellant, and whether their supplies were zero-rated. HMRC confirmed that if doctors were supplying IPL treatment other than for therapeutic or prophylactic purposes, their supplies would be standard rated. Thus the Tribunal finds no breach of the principles of fiscal neutrality.
27.	For the reasons given above the Tribunal dismisses the Appeal and makes no order for costs. 

              

                                 

MICHAEL TILDESLEY OBE
     TRIBUNAL JUDGE
       RELEASE DATE: 5 May 2009

LON/

Notes
28.	The Tribunal directed that the costs regime which operated prior to 1 April 2009 applied to this Appeal
29.	A party wishing to Appeal this decision to the Upper Tribunal must seek permission by making   an application in writing to the Tribunal within 56 days of being provided with full written reasons for the decision. An application for permission must identify the alleged error(s) in the decision and state the result the party making the application is seeking.