Appeal allowed as non-emergency ambulance services qualify for zero-rating.

E-zec Medical Transport Services Ltd (E-zec) was a provider of non-emergency patient transport services (NEPTS). It transported, on behalf of various NHS trusts, patients to and from medical appointments. It operated a fleet of over 500 vehicles and employed a number of sub-contractors. Patients needing to book NEPTS would undertake an initial telephone assessment with E-zec to determine their eligibility and thereafter, if eligible, could book directly with E-zec. On a typical day, each of E-zec's vehicles would carry at least one wheelchair passenger, and on average approximately 40-50% of all those carried in the vehicle required a wheelchair, a bariatric wheelchair or a stretcher. The vehicles were generally configured with eight seats, and had an aluminium tracking system allowing for easy configuration and re-configuration of the seating to accommodate additional wheelchairs. In addition, they featured a wheelchair ramp and winch.

During the relevant periods, Item 4(a), Schedule 8, Group 8, VATA 1994, provided zero rating for supplies of "[t]ransport of passengers in any vehicle, ship or aircraft designed or adapted to carry not less than 10 passengers". Note 4D, Schedule 8, Group 8, VATA 1994, provided that Item 4(a) "includes the transport of passengers in a vehicle … which is designed, or substantially and permanently adapted, for the safe carriage of a person in a wheelchair or two or more such persons, and … which, if it were not so designed or adapted, would be capable of carrying no less than 10 persons".

The base state vehicle models used by E-zec generally had a maximum capacity of between 12-14 seats before wheelchair adaptations were made, but E-zec ordered the vehicles in an 8+2 configuration (i.e. 8 seats including the driver, plus 2 wheelchairs or a stretcher). However, if the wheelchair modifications in the vehicles were removed, the vehicles were capable of carrying 10 or more passengers. The FTT therefore concluded that the vehicles fell within the zero-rating provision of Note 4D and allowed the appeal.

Why it matters: It is surprising that HMRC adopted the position it did in this case, and the decision contains a certain amount of adverse comment from the FTT. It described HMRC's arguments as "uncommercial and frankly unrealistic", noting that the flexibility and adaptability that E-zec had designed into its vehicles was necessary to provide NEPTS.

The decision can be viewed here.