Key Facts
- •Midlands Partnership University NHS Foundation Trust (the Trust) sought a refund of Contracted Out Services (COS) VAT.
- •The Trust provided free health services (health visiting, sexual health, infection prevention and control) to local authorities.
- •HMRC argued the services were exempt or standard-rated supplies, not outside the scope of VAT.
- •The Trust claimed its supplies were "non-business" (not for consideration or economic activity) or that it wasn't a taxable person under Article 13 PVD.
- •The claim involved historic VAT of £800,693 and potentially £2.5 million in subsequent supplies.
Legal Principles
A supply is "for consideration" if there's a legal relationship with reciprocal performance.
Article 2 PVD, Tolsma v Inspecteur der Omzetbelasting Leeuwarden (Case C-16/93)
Economic activity requires a supply made for obtaining income on a continuing basis; a wide-ranging, fact-sensitive enquiry.
Article 9 PVD, Wakefield College v HMRC [2018] EWCA Civ 952
Public bodies governed by public law are not taxable persons for activities done "as public authorities" under a special legal regime; activities done under the same conditions as private operators are taxable.
Article 13 PVD, Comune di Carpaneto Piacentino and others (Case C-129/88), Northumbria Healthcare NHS Foundation Trust v HMRC [2024] EWCA 177
When assessing VAT consequences, characterize relationships by reference to contracts unless vitiated by facts.
Secret Hotels2 Ltd v Revenue and Customs Commissioners [2014] UKSC 16, Airtours Holidays Transport Ltd v Revenue and Customs Commissioners [2016] UKSC 21
Outcomes
The Trust's claim was dismissed.
The court found the services were "for consideration" under Article 2 PVD because the contracts showed a reciprocal obligation for services and payment. The services also constituted "economic activity" under Article 9 PVD as they were provided for obtaining income, despite public funding and the non-profit nature of the Trust. Finally, the Trust wasn't acting "as a public authority" under a special legal regime for Article 13 PVD purposes.