*Update*: The Upper Tribunal reversed the FTT’s decision in favour of LIFE Services Ltd in December 2017. See Graham Elliott’s commentary for further information

The appeal related to supplies of welfare services by LIFE Services Ltd. The issue was whether they were to be treated as exempt from VAT under the provisions of Item 9 Group 7 Schedule 9 VAT Act 1994, or under the provisions of Article 132(1)(g) of the Principal VAT Directive.

The FTT concluded that by recognising charities and not recognising the appellant, Item 9 breaches the principle of fiscal neutrality. As a result the appellant’s supplies of welfare services were to be regarded as exempt.

The case extends the exemption for welfare services wider than charities and state regulated welfare providers, on basis that limitation to these offends fiscal neutrality. This may only be of indirect interest to charities but opens them up to wider competition from the private sector.

The full judgment can be read here.