DCM (Optical Holdings) Ltd v Revenue & Customs [2010] UKFTT 393 (TC) (28 September 2009)

DCM (Optical Holdings) Ltd v Revenue & Customs [2010] UKFTT 393 (TC) (28 September 2009)

The proposed PESM, as revised to exclude zoning, is fair and reasonable for apportioning residual input tax between taxable and exempt supplies, as it logically reflects the use of premises for distinct supplies and avoids distortions inherent in the standard method. The definition of 'medical services' for VAT exemption is confined to therapeutic care, not including frame selection, and the floor-based method is appropriate for premises-related expenditure.

Citation
[2010] UKFTT 393 (TC)
Parties
Appellant: DCM (Optical Holdings) Ltd; Respondents: The Commissioners for Her Majesty’s Revenue and Customs (VAT)
Jurisdiction
United Kingdom
Judgment Date
28 September 2009
Procedural Posture
Appeal / Merits Hearing Following Remittal From Court of Session
Outcome
Provisional approval of the revised PESM (excluding zoning) as fair and reasonable; parties invited to address the severability of zoning before a final decision.
Legal Topics
Partial Exemption Special Method, Residual Input Tax, VAT Apportionment, Medical Services Exemption
Tax Law VAT Partial Exemption Special Method Residual Input Tax VAT Apportionment Medical Services Exemption

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Parties

DCM (Optical Holdings) Ltd

Appellant

The Commissioners for Her Majesty’s Revenue and Customs (VAT)

Respondents

Procedural Posture

Appeal / Merits Hearing Following Remittal From Court of Session

Legal Issues

  1. 1 Whether the proposed Partial Exemption Special Method (PESM) based on floor area is 'fair and reasonable' under VAT Regulations 1995, Regulations 101 and 102
  2. 2 Whether the standard method produces a fair and reasonable apportionment of residual expenditure
  3. 3 Whether zoning (attribution of higher values to certain floor areas) is appropriate in the PESM

Ratio Decidendi

The proposed PESM, as revised to exclude zoning, is fair and reasonable for apportioning residual input tax between taxable and exempt supplies, as it logically reflects the use of premises for distinct supplies and avoids distortions inherent in the standard method. The definition of 'medical services' for VAT exemption is confined to therapeutic care, not including frame selection, and the floor-based method is appropriate for premises-related expenditure.

Court Disposition

Provisional approval of the revised PESM (excluding zoning) as fair and reasonable; parties invited to address the severability of zoning before a final decision.

Orders

  • Parties invited to make submissions on whether zoning is severable from the PESM before a final decision is issued.
  • Costs reserved for final decision.