The Pharmaceutical Journal
Vol 268 No 7193 p487-492
13 April 2002

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HM Customs & Excise (www.hmce.gov.uk)

Dispensing doctors lose VAT case

Dispensing doctors have lost a legal challenge to a Customs & Excise ruling that they cannot reclaim VAT on medicines for direct administration to patients.

Doctors at the Walkergate Surgery, Beverley, North Yorkshire, argued in the High Court that the administration of medicines constituted a supply of pharmaceutical services. This would have meant that the medicines were zero-rated, as they would be if they had been prescribed and then taken away by the patient. The Commissioners for Customs and Excise took a contrary view that when medicines were provided by a doctor and personally administered by him that amounted to a single supply of medical services, which was VAT exempt.

Mr Justice Lawrence Collins ruled on 27 March that the commissioners' view reflected commercial reality.

If the judge had ruled that there were two distinct services — a VAT exempt medical service and a zero-rated pharmaceutical service — the GPs would have been able to reclaim the VAT they paid on the acquisition cost of the medicines administered.