Midlands Partnership University NHS Foundation Trust, R (on the application of) v The Commissioners for HMRC
[2024] UKUT 334 (TCC)
Northumbria Healthcare NHS Foundation Trust v The Commissioners for HMRC
27 February 2024
[2024] EWCA Civ 177
Court of Appeal
The question was whether NHS hospitals need to charge VAT on parking fees. The court decided that because NHS hospitals have special rules about how they set parking prices (fair prices, concessions for some people), they don't need to charge VAT. The government hadn't shown that not charging VAT would unfairly hurt private car parks.
Key Facts
- •Northumbria Healthcare NHS Foundation Trust (the "Trust") appealed HMRC's decision that VAT is chargeable on hospital car parking charges.
- •The Trust's claim for VAT repayment covers a three-year period (2013-2016).
- •Approximately 50 similar appeals by other NHS bodies are stayed pending this appeal.
- •The total tax at stake for past periods is around £70m.
- •The Trust operates car parks itself; the case doesn't involve outsourced management.
- •The appeal focuses on car parking at healthcare facilities, not other Trust-owned land.
- •The Trust relies heavily on the Department of Health's 2015 Parking Principles guidance.
- •Relevant legislation includes Article 13(1) of Council Directive 2006/112/EC (Principal VAT Directive) and section 41A of the Value Added Tax Act 1994.
Legal Principles
Article 13(1) of the Principal VAT Directive must be interpreted strictly as a derogation from the general rule that economic activities are subject to VAT.
CJEU Case Law
To determine if a public authority acts "as a public authority", the sole criterion is whether the activities are carried out under a "special legal regime" applicable to them, rather than under the same legal conditions as private traders.
CJEU Case Law (Carpaneto 1)
The "special legal regime" test is met if the activity involves the use of public powers, but this is not the only way to satisfy it. Legal conditions impacting the activity's lawful conduct and not applicable to private operators also suffice.
CJEU Case Law
For significant distortion of competition, the analysis must focus on the activity itself, irrespective of any particular local market; it encompasses actual and potential competition, provided the possibility of private entry is real, not hypothetical; any distortion exceeding negligible is significant; and an assessment of economic circumstances is required.
CJEU Case Law (Isle of Wight CJEU)
Guidance combined with a legally enforceable duty to adhere to it, unless a good reason exists to deviate, can constitute a special legal regime.
Case Law (Munjaz, Hemmati)
Outcomes
The Court of Appeal allowed the Trust's appeal.
The Upper Tribunal and First-tier Tribunal erred in law by not recognizing that the Trust provided car parking under a special legal regime due to the combination of the 2015 Parking Principles and the legally enforceable duty to adhere to them. HMRC failed to demonstrate significant distortions of competition would result from non-taxation.
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