VAT Update – November 2021

2 Nov 2021

VAT Update

In this month’s VAT Update we review the latest Upper Tier Tribunal case regarding the VAT treatment of the activities of an umbrella company in the recruitment sector. We highlight complexities that can arise in the self-storage sector and note HM Revenue & Customs (HMRC) have an interesting decision to make on swimming lessons. Finally, we outline some positive news for overseas companies registered for VAT in the UK.

Is an umbrella company providing VAT exempt medical care?

The Upper Tier Tribunal (UTT) has concluded that the services of an umbrella company (Mainpay Ltd) providing medical practitioners do not qualify for VAT exemption. The basis for this decision is that an umbrella company is not providing medical care and is instead supplying staff. This supply is subject to VAT at the standard-rate.

Mainpay’s argument was that its supplies of medical consultants and specialist general practitioners to an agency, which then supplied those individuals to NHS Trusts and other hospitals, qualified for VAT exemption. The First Tier Tribunal (FTT) and the UTT disagreed and rejected the argument that Mainpay was carrying out “clinical decision-making” which could be said to be medical care. Mainpay itself was not registered with any medical body, nor did it have any specific medical expertise. The NHS Trusts were viewed by the UTT to be exercising control over the practitioners to the same degree as those which they directly employed, meaning the terms of the medical exemption were not met.

In deliberating the case, the UTT confirmed that the contractual arrangements should be viewed from the commercial and economic reality. The contractual terms should not be looked at in isolation.

Comment: The supply chain for the provision of temporary medical staff is complex and often involves several stakeholders, including the practitioners themselves, staff bureau/agencies, umbrella companies, and medical institutions. Difficulties arise in categorising the supply between one of services (which could potentially be exempt in the case of supplies of GPs and medical consultants), or one of staff. The issue of who in the supply chain ultimately has control over the individual(s) in question, is often the critical one, as noted in Mainpay. In our view, the decision of the UTT in Mainpay is not unexpected and it highlights the importance of reviewing contracts to determine what the reality of the delivery of the service is when considering whether the VAT exemption applies.

To discuss this case further, please contact Sean McGinness, partner and Head of VAT.

Mainpay Ltd v Revenue and Customs [2021] UKUT 270 (TCC) (1 November 2021) (

A supply of land or of self-storage facilities?

In a recent Rural Business article we highlighted the VAT treatment of the provision of self-storage facilities and the complexities that can arise in the sector. Some such complexities were brought into focus again in the recent FTT case of Harley Scott Commercial Limited (formerly Store First Midlands Limited).

In this case, the point in question was whether the supply by the appellant was one of providing self-storage facilities, which is subject to VAT, or whether it was making an exempt supply of land to investors who had taken a long leasehold interest in ‘storage pods’ built within a commercial property. The long leasehold interest was registered with the Land Registry. HMRC had issued best judgement assessments on the basis the supply was taxable. The FTT concluded it was an exempt supply of land. Had the investors receiving the supply from the appellant used the facilities for their own self-storage purposes, the supply would have been subject to VAT. It was the case that over 99% of the investors granted licenses to the storage pods back to the appellant, which then did make a taxable supply of facilities for self-storage to end-customers.

One of the main deliberations for the FTT was whether the store pods could be said to be immoveable property – VAT exemption could only be considered if they did comprise immoveable property. The physical nature of the construction of the store pods (resembling separate rooms within a building) meant they were immoveable property in the FTT’s view.

Comment: This case is interesting on a number of fronts, including the substance of the supply to the investors being one of a lease or letting of immoveable property and not a supply of self-storage facilities. The process the FTT went through to conclude that the storage pods do qualify as immoveable property is also noteworthy. The fact that removing a single pod would cause damage to adjoining pods was important in the final analysis.

Supplies relating to self-storage facilities remain complex from a VAT perspective and it is recommended that advice is sought on the appropriate VAT treatment. The legal and factual situation should be reviewed on a case-by-case basis.

If you would like advice on the VAT position of supplies of self-storage, please contact Nick Hart, VAT Director.

Harley Scott Commercial Ltd (Formerly Store First Midlands Limited) v Revenue & Customs (VAT – exemptions – whether lease of immoveable property) [2021] UKFTT 368 (TC) (11 October 2021) (

HMRC swimming in uncertain waters

In Dubrovin & Tröger GbR – Aquatics, VAT case C 373/19, the European Court of Justice (CJEU) ruled that swimming tuition provided by a privately-run swimming school in Germany was not providing education similar to that provided by a university or school. Its supplies were therefore not exempt from VAT. In the CJEU’s view, specialised tuition such as teaching children to swim did not a involve the tutors providing a wide range of knowledge and skills to the children and therefore private swimming lessons fell short of being supplies of education.

Comment: Whilst the VAT liability of private swimming lessons does not have far-reaching consequences beyond the providers of such a service, this case is particularly interesting in terms of how HMRC will react to it.

Post-Brexit, the UK is no longer bound by the decisions of the CJEU and we might expect HMRC to begin to diverge from the application of CJEU judgements and essentially formulate VAT policy based on a UK only view. This case may act as an interesting barometer to gauge HMRC’s current appetite to no-longer apply new EU jurisprudence in its own guidance.

HMRC’s current policy is to treat private swimming lessons as VAT exempt supplies of education, so it will be interesting to see if they apply the CJEU’s judgement and change the treatment to taxable, or ignore it and continue to allow exemption. The CJEU previously reached the same conclusion about driving lessons, in terms of them being taxable and not exempt. HMRC’s position on driving lessons follows that position and so, should HMRC continue to allow exemption for private swimming lessons, the question remains whether it also then revisits the position it has applied to driving lessons, now the UK is no longer bound by CJEU decisions?

If you would like advice on continued reliance on CJEU judgements when adopting a certain VAT treatment to a supply, please contact Sean McGinness, partner and Head of VAT.

VAT repayments: overseas UK VAT-registered traders

HMRC has indicated it plans to stop its systems automatically issuing payable orders to non-established VAT registered persons (NETP) and to allow overseas persons who are VAT registered in the UK to provide their bank account details in order to receive VAT refunds directly. HMRC had received complaints from NETP that they can no longer bank payable orders issued by HMRC in their country, to a number of factors. HMRC acknowledges issuing payable orders is, in some cases, denying NETP the opportunity to receive the cash from VAT refunds to which they are entitled.

The change in approach will see HMRC create a ‘Gform’ that will enable NETP to send their overseas bank account information to HMRC. It is hoped that this will prevent automatic payable orders being issued to NETP and enable HMRC to send CHAPS payments. Once available, NETPs will be able to access the Gform via their government gateway accounts. It is not yet clear when the form will be available though.

You can read HMRC’s full announcement here.

Comment: This is welcome news and shows HMRC is listening to feedback it receives from NETP, who are not able to bank payable orders issued by HMRC for VAT refunds due. NETP facing cashflow issues will be relieved to know that they can expect CHAPS repayments directly into their overseas bank accounts in the near future. NETP are registered for VAT in the UK because they are making taxable supplies here, which would generally give rise to them being in a VAT repayment position when they submit their VAT returns. However, for a number of reasons and circumstances, NETP do find their VAT returns are reporting a VAT refund and the issuance of a payable order has long been a point of frustration for NETP.

We will continue to monitor HMRC’s guidance to see when the Gforms will be available. If you have any questions in the meantime, please contact Nick Hart, VAT Director.