Transactions relating to payments or transfers of money are specifically exempted from VAT by the Principal VAT Directive. The questions in this case were whether DPAS supplied services to patients and, if so, whether they were exempt from VAT under this particular heading. The CJEU issued a judgment in 2010 in a similar case (Axa Denplan) which ruled that the services were not exempt transactions but were, instead, debt collection services which were subject to VAT. DPAS' response to Axa Denplan was to alter its business model to ensure that its services were supplied to the patients and could not, therefore be regarded as debt collection.

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Summary
Transactions relating to payments or
transfers of money are specifically
exempted from VAT by the
Principal VAT Directive. The
questions in this case were whether
DPAS supplied services to patients
and, if so, whether they were
exempt from VAT under this
particular heading.
The CJEU issued a judgment in
2010 in a similar case (Axa Denplan)
which ruled that the services were
not exempt transactions but were,
instead, debt collection services
which were subject to VAT.
DPAS' response to Axa Denplan
was to alter its business model to
ensure that its services were
supplied to the patients and could
not, therefore be regarded as debt
collection.
28 July 2015
Upper Tribunal
The Upper Tribunal has released its judgment in the case of HMRC v DPAS Ltd
(DPAS). This was an appeal by HMRC against the First-tier Tax Tribunal's (FTT)
decision. The case concerned the questions of whether DPAS supplied services to
patients and, if they did, whether those services were taxable or VAT exempt.
In October 2010, the Court of Justice issued an unexpected judgment in the case of
Axa UK Ltd (Case C-175/09) – otherwise known as the 'Denplan' case. In that
judgment, the Court ruled that the services that Denplan provided to dentists were not
exempt from VAT but were, in fact, debt collection services which were subject to
VAT at the standard rate.
DPAS Ltd provides similar services to Axa and sought to re-arrange its business model
so as to ensure that it was seen to be acting for the dental patient rather than the dentist.
By changing the terms and conditions, DPAS wanted to ensure that its collection of
direct debits was a service provided to the patient and not be seen as a debt collection
service provided to the dentist. DPAS wrote to all of the dentists' patients inviting them
to accept the new arrangements. However, only 30% of the patient's responded – the
other 70% continued to pay by direct debit but did not expressly accept the new terms
and conditions of the contract. DPAS argued that the service it provided to all of the
patients was an exempt supply (as a supply relating to money transfers or payments).
The FTT agreed with that analysis and allowed DPAS' appeal. HMRC appealed to the
Upper Tribunal arguing that firstly, the FTT had erred in law when it found that the
70% of customers that had not responded had accepted the new terms by their conduct
(ie by continuing to pay by direct debit). The Upper Tribunal agreed with HMRC on
this point. As far as VAT liability of the service to patients is concerned, this question
was stayed pending the outcome of litigation in the cases of Bookit and NEC. Both of
these cases are pending before the Court of Justice and it is likely to be twelve months
or so before the issue is finalised.
HMRC v DPAS Ltd
Case Alert
Contact
Stuart Brodie Scotland stuart.brodie@uk.gt.com (0)14 1223 0683
Karen Robb London & South East karen.robb@uk.gt.com (0)20 772 82556
Andrea Sofield London & South East andrea.sofield@uk.gt.com (0)20 7728 3311