In HMRC v DPAS Ltd (Case C-5/17) the Advocate General (AG) has opined that dental payment plan administrative services are not exempt from VAT under Article 135(1)(d) of Directive 2006/11/EC (the Principal VAT Directive).


Dental Plan Administration Services Ltd (DPAS), a UK based company, provides dental plan administration. Following the CJEU’s decision in AXA Denplan (C-175/09), DPAS restricted its contractual arrangements to ensure that its services were provided to patients rather than to dentists, as was the case in AXA Denplan.

As a result of its restructuring, DPAS contended that its supplies of services to patients, for which it charged a plan fee, qualified as an exempt transaction concerning payments (within article 135(1)(d) of the Principal VAT Directive. Its supplies to patients were, essentially, payment facilitation involving direct debit payments and forwarding on amounts due to the dentists. In addition, since this supply was made to patients rather than to the creditor dentists, it could not amount to “debt collection”. Debt collection, as a subcategory of transactions concerning payments and transfers, is excluded from the VAT exemption.

HMRC disagreed, arguing that the necessary functional analysis of the transactions made clear that DPAS did not effect any transfers or payments and the services did not qualify for the exemption.

The FTT agreed with DPAS and held its services were correctly exempted from VAT. On appeal, the UT considered that it was not clear whether DPAS’s services consituted “transactions concerning payments or transfers”. The UT also expressed doubt as to the scope of the exclusion for debt collection. In light of this, the UT decided to refer a number of questions to the CJEU relating to the correct interpretation of the exemption and the correct construction of “debt collection” in this context.

AG’s opinion

The AG concluded that the services provided by DPAS were “mere physical, technical or administrative services” and were therefore subject to VAT.

The AG acknowledged that the CJEU decision in AXA Denplan cannot be reconciled with either earlier or later case law of the Court on the scope of the exemption under Article 135(1)(d). In the AG’s view, there was no doubt that the correct approach to the scope of the exemption is as set out by the CJEU in Bookit (C-607/14) and National Exhibition Centre (NEC) [2016] STC 2132, and not AXA Denplan. In particular, Article 135(1)(d) only applies to transactions that have the effect of making the legal and financial changes characteristic of transfers of money.

The AG noted that DPAS obtained the authority to request the transfer of money in the name and on behalf of the patient, from the patient’s bank, but the AG considered this was merely an administrative task concerned in the moving of money between bank accounts. Whilst DPAS’ supplies were essential in order for the banks to complete the payment transfers, that in itself was insufficient. DPAS did not itself debit or credit the respective bank accounts and therefore did not qualify for the exemption.

Having opined that the services did not amount to payments or transfers, the AG went on to consider the issue of debt collection. The AG noted that the arrangements were introduced to take advantage of the decision in AXA Denplan. There was no substantive changes to the services, and the literature provided by DPAS to its customers (both dentists and patients) reflected this. The material emphasised that the changes were “purely administrative” and made “no practical difference to the current arrangements”. As a result, the AG considered that the restructuring should be considered irrelevant; the economic reality of the arrangements being determinative. If the services were debt collection before the restructuring, they remained debt collection after the restructuring and fell outside of Article 135(1)(d).


The AG recognised the tension between CJEU case law in this area but ultimately considered that elements of AXA Denplan had been wrongly decided. He preferred to follow the approach adopted in Bookit, which suggests a narrower function-based approach to the exemption.

It will be interesting to see if the CJEU follows the AG’s approach. If it does, this will potentially affect businesses that are involved with initiating and processing payments pursuant to a direct debit mandate. Questions will also arise concerning the circumstances in which a non-financial services business effects a payment or transfer.

A copy of the AG’s opinion is available to view here.