Northumbria Healthcare NHS Foundation Trust v HMRC

In Northumbria Healthcare NHS Foundation Trust v HMRC [2019] UKUT 170 (5 June 2019) the UT found that the effect of the VAT (Treatment of Transactions) Order 1992/630 (the ‘de-supply order’) was that the trust which provided leased cars to employees was not carrying an economic activity.

The trust had acquired cars to provide them to its employees and to employees of other NHS trusts in the same divisional VAT registration (akin to VAT grouping) under a salary sacrifice scheme (‘the car scheme’). It had claimed over £14m input tax. HMRC had restricted recovery to 50% on the ground that the VAT had been incurred for the purpose of a business carried on by the trust (VATA 1994 s 41(3)) so that the VAT (Input Tax) Order 1992/3222 (the ‘blocking order’) applied. As a claim under s 41(3) does not fall within the scope of s...