Pirmal Healthcare UK Limited v The Commissioners for HMRC
[2023] UKFTT 891 (TC)
Boehringer Ingelheim Limited v The Commissioners for HMRC
21 October 2024
[2024] UKFTT 948 (TC)
First-tier Tribunal
A drug company paid money to the government to keep drug prices low. The company argued this should reduce its VAT bill. The court agreed, saying the government is the one ultimately paying and therefore the final consumer, even though it doesn't buy directly. The government's argument that the company would be unfairly enriched by a refund was rejected.
Key Facts
- •Boehringer Ingelheim Limited (BIL) made payments to the Department of Health and Social Care (DHSC) under voluntary price control schemes (PPRS and VPAS).
- •BIL claimed VAT repayment on the grounds that these payments reduced the consideration for its supplies of medicines.
- •HMRC rejected the claim, arguing the payments didn't reduce consideration and that repayment would unjustly enrich BIL.
- •BIL appealed to the First-tier Tribunal (Tax Chamber).
Legal Principles
Where the price is reduced after the supply takes place, the taxable amount shall be reduced accordingly.
Article 90(1) of Directive 2006/112/EC (Principal VAT Directive or PVD)
The taxable amount for supplies includes everything constituting consideration obtained by the supplier from the customer or a third party.
Article 73 PVD
Taxable amount is the 'subjective value' – the value actually received, not an objectively estimated value.
Elida Gibbs, EC v Germany
The taxable amount cannot exceed the consideration actually paid by the final consumer.
Elida Gibbs, EC v Germany
Tax authorities may not collect VAT exceeding what the taxable person received.
Boehringer 1, Boehringer 2, Novo Nordisk
The final consumer doesn't need to be in the contractual supply chain.
Boehringer 1, Boehringer 2
A price reduction can stem from a legal obligation, not just voluntary agreements.
Novo Nordisk
Taxable amount isn't reduced if the supplier's payment to another person isn't linked to the supply.
Ibero Tours
Outcomes
Appeal allowed.
BIL's payments to DHSC reduced the consideration received for its medicine supplies; DHSC, as the entity ultimately bearing the cost, is considered the final consumer; repayment would not unjustly enrich BIL.
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