The First-tier Tax Tribunal has ruled in the NHS’s favour in the case of Isle of Wight NHS Trust, Betsi Cadwaladr University Health Board, Southport and Ormskirk Hospital NHS Trust v HMRC [2023] UKFTT 23 (TC).
The NHS had written a letter to HMRC asking them to reconsider their policy in respect of locum doctors. The NHS believed that supplies of locum doctors should be exempt from VAT by virtue of VATA 1994, Sch. 9, Grp. 7, Item 5, introduced by SI 1979/246, art. 3(c) (VAT (Medical Goods and Services) Order 1979), as the provision of a deputy for a person registered in the register of medical practitioners and described in the explanatory note as “the provision of a deputising service for doctors.”
HMRC’s policy is contained in VAT Notice 701/57, s. 6.5 and states “Where a locum doctor is supplied by an employment business or similar body to a third party (like a GP Practice) which controls and directs him or her, it is a supply of staff. Supplies of staff do not fall within the exemption and are therefore taxable, with VAT being charged at the standard-rate.”
HMRC replied to the letter maintaining that their policy was correct and stating that “For the avoidance of any doubt, HMRC does not share the views set out in your letter/report.”
The NHS appealed to the tribunal but HMRC applied to have the appeal struck out on the grounds that:
- The tribunal lacked jurisdiction because HMRC had not made an appealable decision; they simply issued a letter which responded to what HMRC viewed as a speculative, theoretical and general enquiry. Their response to that enquiry was not intended to be, and was not, a decision. They had made no decision on the VAT liability on a specific supply or for a particular taxpayer.
- In the event that the tribunal did have jurisdiction, the appellants lacked standing because they had not shown that they had a sufficient interest in the appeals and/or were not party to the communication with HMRC.
The FTT considered the matter and decided that:
- HMRC’s reply made it clear that the NHS’s technical submission had been considered and rejected and thus there was an appealable decision in terms of VATA 1994, s. 83.
- The NHS trusts affected by the issue had a sufficient financial interest to have standing in respect of the matter.
HMRC’s application for the appeal to be struck out was therefore dismissed.
https://www.bailii.org/uk/cases/UKFTT/TC/2023/TC08682.html
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