Medical care and sales of contact lenses

The taxpayer traded from a warehouse in York and supplied dispensing services to UK customers who bought contact lenses online through a website managed by an associated business based in the Netherlands Vision Dispensing BV (VDBV). VDBV supplied the lenses to customers because of regulatory issues – via the York warehouse - and VDL supplied the dispensing services. Each customer knew they were dealing with two different suppliers when they placed an order and agreed the terms and conditions. The taxpayer’s share of the customer payment was 18% and VDBV retained 82%. VDL treated its fees as an exempt supply of medical care but HMRC disagreed.

A service must meet two conditions under VATA 1994 Schedule 9 Group 7 to qualify for VAT exemption. It must be intended to prevent maintain or cure a health issue and it must be carried out by or under the...