Summary of the facts
DPAS, which is the acronym for ‘Dental Plan Administration Services’, designs, implements and manages dental plans in the United Kingdom. Those plans, provided by DPAS to dentists, are subsequently practice-branded by DPAS on behalf of the dentists to their patients.
DPAS sent each of its dentist clients a letter on their headed notepaper to be sent to their patients who had taken out a dental plan. That letter stated that the dental practice had paid an administration charge to DPAS which was deducted from the monthly direct debit payment made by the patient, that it had been agreed with DPAS to make some changes in the dental plan administrative arrangements and that, from that point on, it was proposed that part of the monthly amount paid by the patient to DPAS by direct debit would henceforth be retained by the latter ‘in respect of its obligation to [the patient] to manage and administer [its] dental plan payments, [its] supplementary insurance cover and dental emergency helpline’. It was emphasised that these were ‘purely administrative changes [which did not affect] the cover provided under the dental plan or the level of [the] total monthly payments’.
Questions referred to the ECJ
By making reference to Article 135(1)(d) of the VAT Directive, the referring court asked whether a service consisting of directing pursuant to a direct debit mandate, that money is taken by direct debit from a patient’s bank account and passed by the taxpayer, after deduction of the taxpayer’s remuneration, to the patient’s dentist and insurance provider, would constitute an exempt supply of transfer or payment services within Article 135(1)(d) of the VAT Directive;
Which are the relevant principles to be applied for determining whether or not a service (such as that performed by the taxpayer in the present case) falls within the scope of “debt collection” within Article 135(1) (d) [of the VAT Directive]?
Conclusions by the ECJ
Article 135(1)(d) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that:
The exemption from value added tax which is provided for therein for transactions concerning payments and transfers does not apply to a supply of services (such as that at issue in the main proceedings) which consists for the taxable person in requesting from the relevant financial institutions, first, that a sum of money be transferred from a patient’s bank account to that of the taxable person pursuant to a direct debit mandate and, second, that that sum, after deduction of the remuneration due to that taxable person, be transferred from the latter’s bank account to the respective bank accounts of that patient’s dentist and insurer.
The ECJ stated that in the light of the answer to the first question, there is no need to reply to the second question.
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