The issue was whether the administration of prescribed drugs by nurses to patients in their own homes was a supply of zero-rated drugs, as claimed by the appellant, or exempt medical services, as argued by the commissioners. The dispute related only to situations in which nurses attended patients’ homes to administer drugs and those in which the nurses attended the patients’ homes to instruct the patients in self-administration.

The appellant was engaged by hospitals to provide the service of delivery and administration of drugs to patients in their own homes. Drugs which the patient was able to administer, such as oral medicines, would be delivered by the appellant to the patient's home. At the other extreme, it was necessary for a nurse to administer every dose of the drug, for example in respect of chemotherapy drugs.

The appellant submitted that the approach to be followed was that set out by the House of Lords in Beynon and Partners vC &E Commrs [2005] BVC 3, where the Lords were required to consider the tax treatment of supplies made by doctors who, in addition to diagnosis and prescription, dispensed and administered drugs. Lord Hoffman held that it was artificial to attempt to dissect the transaction and that what was actually supplied was a single supply of services. In the appellant's view, one should not attach too much importance to the ‘principal’ and ‘ancillary’ test but should have regard to the level of generality which corresponds with social and economic reality. In this case, even though the input of the nurse might be of critical importance, the economic reality was that the patient was receiving a supply of drugs. He had already had the benefit of a doctor's diagnosis and prescription and was now receiving the drugs prescribed. The fact that the nurse might have to administer them did not alter the essential characteristic of the supply. The appellant also made the point that the commissioners’ approach to those cases in which the nurse was required only to train the patient in self-administration created practical difficulties in that one could not know, at the time the drugs were delivered and invoiced, whether they would form part of an exempt supply or would constitute a zero-rated supply.

The commissioners argued that it was not possible to distinguish the case of Beynon in the way the appellant had sought to do. Although there were differences between Beynon and the present case, there was, nevertheless, a clear similarity. The supplies in each case were essentially the same and should receive the same VAT treatment. The relative costs of the drugs and administration were irrelevant; what mattered was the nature of the supply. Had the patient remained in hospital, he or she would have received the same care from a nurse or doctor and the supply would have been regarded as an exempt supply of medical services, including the drugs. In the commissioners’ view, it would be anomalous to treat the appellant's supplies differently.

The commissioners’ solution of treating supplies when a nurse was present as exempt and when no nurse was present as zero-rated was both simple and consistent with the tax treatment of medical care given in hospitals.

The tribunal allowed the company's appeal.

1. Although the tribunal did not accept all of the appellant's arguments, its approach was to be preferred. What the appellant supplied was the antithesis of the supplies found to be exempt in Beynon. In that case, the determining characteristic of the supply was the doctor's service of consultation, diagnosis and prescription, to which the dispensing and administration of the drug were ancillary or subordinate. The appellant's supplies were the equivalent of the doctor's supply of a vaccine to an intended traveller and although it could be argued that such supplies by a doctor would be those of medical care, that would be the wrong approach.
2. The essential characteristic of the doctor's supply was determined by the examination, consultation, diagnosis and prescription; the execution of the prescription being an ancillary supply. In the present case, it was the execution alone which constituted the supply. The determining factor was what the patient required, namely the drug, and the fact that it was necessary in some cases for the drug to be administered by a nurse did not alter the fundamental characteristic of the supply.
3. Where a nurse attended a patient's home to administer drugs supplied by the appellant, the supply was one of goods. This was even more clearly demonstrated where the nurse attended to instruct the patient in the self-administration of the drugs.

No. 20,379