NHS Trusts to receive VAT windfall

Around 140 NHS Trusts across England could benefit from a VAT windfall worth millions of pounds following a climbdown by HM Revenue & Customs.

RSM has received confirmation that HMRC has decided to no longer oppose outstanding appeals by NHS Trusts relating to entitlement to VAT reclaims, some dating back to the introduction of VAT in 1973. Previously, these appeals had been denied by HMRC who argued they could not be sure that modern day NHS Trusts should be allowed a repayment of VAT originally accounted for by predecessor Hospital Boards and Health Authorities.

Following a VAT tribunal last year (North Lincolnshire and Goole Hospitals NHS Trust vs HMRC) the tribunal commented that, as the Secretary of State had effected the various re-organisations, there must clearly be a transfer of rights and property to the successor NHS operators. Despite this ruling, and until now, HMRC has maintained its previous stance and refused to refund other NHS claimants.

The VAT reclaims, in the main, relate to VAT overpaid by Hospital Boards and Health Authorities on what should have been VAT zero-rated ‘takeaway’ food and VAT recovery on purchases of drugs and prostheses for onward supply to private patients; 

RSM VAT Director Scott Harwood said:

‘After an exhaustive and largely unnecessary battle with HMRC, this appears a great result for the NHS and will free up more cash for frontline services. While many people may feel this is simply Government money going round in a circle, the key point is that it actually relates to their commercial activities and the NHS were originally denied VAT that they were correctly entitled to’.

‘We now expect HMRC to contact all the relevant Trusts to verify and agree the quantum of each submitted claim.’