On June 10, 2010, the ECJ issued its decision in the case C-86/09 (Future Health Technologies).
Comtext: Directive 2006/112/EC – Exemptions – Article 132(1)(b) and (c) – Hospital and medical care and closely related activities – Provision of medical care in the exercise of the medical and paramedical professions – Collection, testing and processing of umbilical cord blood – Storage of stem cells – Possible future therapeutic use – Transactions comprising a bundle of features and acts
Article in the EU VAT Directive
Article 132(1)(b) and (c) in the EU VAT Directive
1. Member States shall exempt the following transactions:
(b) hospital and medical care and closely related activities undertaken by bodies governed by public law or, under social conditions comparable with those applicable to bodies governed by public law, by hospitals, centres for medical treatment or diagnosis and other duly recognised establishments of a similar nature;\
(c) the provision of medical care in the exercise of the medical and paramedical professions as defined by the Member State concerned;
- FHT is accredited and licensed by the relevant British authorities as a private stem cell bank. In connection with the services it supplies to parents of newborn children, it carries out activities consisting in the dispatch of a kit for collecting blood from the umbilical cord and in the testing and processing of that blood and, where appropriate, in the storage of stem cells contained in it.
- Those activities are directly supervised by a clinical scientist registered as a health professional in the register kept under the Health Professions Order 2001. The stem cells are collected at birth with a view to their possible future use for medical treatment of the child itself (‘autologous’ use) or of other persons (‘allogeneic’ or ‘heterologous’ use). By virtue, in particular, of the contract between FHT and the child’s parent or parents (‘the Contract’), the cells processed and stored by FHT are for medical use only. They are not available for research or experimentation.
- In each case the events which will or may occur in consequence of FHT agreeing to provide its services under the Contract are as follows:
- (a) a kit for collecting umbilical cord blood is sent to the parents of the unborn child;
- (b) the parents arrange (at their own expense) for a medical professional attending the birth to collect blood from the umbilical cord shortly after birth;
- (c) the blood is transported by medical courier to FHT’s laboratory. This is a purpose-built facility for the analysis and extraction of stem cells from umbilical cord blood;
- (d) employees of FHT test the blood to ensure that it is not contaminated with any medical condition that could be transmitted via the blood. This testing occurs soon after birth and again after 6 months;
- (e) the blood is then processed to extract a sample of stem cells suitable for medical application;
- (f) the stem cell sample is cryopreserved and stored ready for use;
- (g) the sample is stored pending use in medical treatments; and
- (h) the stem cell sample is released on request of the parents (until the child is 18 years old) for use in medical treatment.
- There are two options for payment under the Contract. The first option requires the client to pay two fixed sums for all the activities in question in the main proceedings, including six months’ storage, together with a further annual sum for continuing storage of the stem cells. The second option enables the client to pre-pay three fixed sums for all those activities and for 20 years’ storage in advance. The total price under the first option is GBP 995 plus a further annual sum of GBP 30. If the second option is chosen the total price will be GBP 1 295.
- According to the decision making the reference, the cost to customers taking the 20 year storage package is apportioned as follows:
- Item (a) in paragraph 16 above constitutes 15% of the total cost to the customer (requiring the payment of a fee of GBP 200);
- Any costs associated with Item (b) are for the customer to arrange independently;
- Items (c) to (e) in paragraph 16 above, namely transport to FHT’s laboratory, processing, analysis and testing, constitute 62% of the total cost to the customer (requiring the payment of a fee of GBP 795);
- Item (g), that is to say the storage, constitutes 23% of the total cost (requiring the payment of a fee of GBP 300).
- The costs incurred by FHT in providing the activities in question in the main proceedings can be broken down as follows:
- Supply of cord blood collection kit and administration: 7%;
- Processing, analysis, testing and cryopreservation of a sample: 91%;
- Storage of the prepared sample: 2%.
- The vast majority of the staff time relating to the delivery of the supplies under the Contract is associated with the analysis, testing and subsequent processing of the blood. The staff time associated with storage, once the samples are cryopreserved, is minimal.
- The decision making the reference states that, initially, HMRC took the view that the collection and testing of stem cells – but not their storage – were exempt under Item 8 in Group 7 of Schedule 9 to the Value Added Tax Act 1994 (supply of human (including foetal) organs or tissue, etc.). FHT was thus treated as effecting both exempt and taxable transactions.
- HMRC subsequently took the view that the principal supply was storage of the stem cells, an activity which did not constitute medical treatment, and that the analysis and processing of the cells was ancillary to that activity. Moreover, even if the activities were to be examined separately, testing and processing of stem cells was not, in their view, to be regarded as medical care.
- FHT appealed to the VAT and Duties Tribunal, Manchester, claiming that:
- the supplies it made constitute a single composite supply of prophylactic medical care covered by the exemption under Article 132(1)(c) of Directive 2006/112; or
- they constitute a single composite supply of hospital or medical care or activities closely related thereto covered by the exemption under Article 132(1)(b) of that directive, or
- alternatively, if the supplies made by FHT do not constitute a single composite transaction, the supplies of collection, testing, analysing, processing and cryopreserving, as well as that of making the stem cells available in due course for therapeutic purposes, are each an exempt transaction within Article 132(1)(b) and (c) of that directive.
1. Where activities consisting in the dispatch of a kit for collecting blood from the umbilical cord of newborn children and in the testing and processing of that blood and, where appropriate, in the storage of stem cells contained in it for possible future therapeutic use, are intended only to ensure that a particular resource will be available for medical treatment in the uncertain event that treatment becomes necessary but not, as such, to diagnose, treat or cure diseases or health disorders, such activities, whether taken together or separately, do not come within the concept of ‘hospital and medical care’ in Article 132(1)(b) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, or within that of ‘the provision of medical care’ in Article 132(1)(c) of that directive. It would be otherwise, as regards the analysis of umbilical cord blood, only if such analysis were actually intended to enable a medical diagnosis to be made, which it is for the referring court, if need be, to determine.
2. The concept of activities ‘closely related’ to ‘hospital and medical care’, within the meaning of Article 132(1)(b) of Directive 2006/112, is to be interpreted as not covering activities, such as those in question in the main proceedings, consisting in the dispatch of a kit for collecting blood from the umbilical cord of newborn children and in the testing and processing of that blood and, where appropriate, in the storage of stem cells contained in it for possible future therapeutic use to which those activities are merely potentially related and which has not been performed, commenced or yet envisaged.
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