Greater Glasgow & Clyde Health Board

JurisdictionUK Non-devolved
Judgment Date13 March 2015
Date13 March 2015
CourtFirst-tier Tribunal (Tax Chamber)
[2015] UKFTT 0119 (TC)

Judge Kenneth Mure, QC, Mr S A Rae, LLB, WS, Mr Peter R Sheppard, FCIS, FCIB, CTA

Greater Glasgow & Clyde Health Board

David Southern, QC, instructed by Liaison Financial Services Limited, appeared for the Appellant

Sean Smith, QC, instructed by Douglas Pate, Solicitor to HM Revenue and Customs, appeared for the Respondents

Value added tax – Late claim for VAT repayment – Repayment of input tax relating to business activities – Whether quantifiable and due – No – Finance Act 2008 (“FA 2008”), s. 121 – Value Added Tax Regulations 1995 (SI 1995/2518), reg. 37 – Appeal dismissed.

The First-tier Tribunal (FTT) dismissed the appeal against HMRC's decision to reject a late claim for repayment of VAT concerning dining-room expenditure, residual revenue expenditure and capital expenditure.


In addition to its non-business activities, the Appellant conducted some business activities that were within the scope of VAT, such as catering.

The Appellant belatedly reclaimed VAT attributable to taxable business activities over a 20-year period in relation to dining-room expenditure, residual revenue expenditure and capital expenditure. The repayment claim was rejected by HMRC. The Health Board appealed against that rejection.

The onus of proof fell on the Appellant. The standard of proof was the balance of probabilities (para. 105 of the decision).

HMRC argued that the claim was defective, as reg. 37 required it to state the sum due and the manner of its calculation (para. 107 of the decision).

Both parties acknowledged that a substantial sum of input VAT was repayable. The difficulty was computational (para. 121 of the decision).

Both parties agreed that the FTT had full jurisdiction relating to the dispute, which was determining a sum repayable by HMRC (para. 125 of the decision).

The FTT considered whether the claim represented a new claim, which was time-barred. The FTT distinguished between:

  1. 1) an adjustment and an amendment of an initial claim; and

  2. 2) an enlargement or enhancement of it by introducing extra distinct elements.

One issue was whether repayments of VAT due to the former Argyll and Clyde Health Board had been introduced to the disputed claim after the time-bar, which expired on 31 March 2009. The entitlement to claims of former Scottish Health Boards had been passed to their successors. The geographical area of the defunct Argyll and Clyde Health Board and its responsibilities had been divided between the Appellant and the Highland Health Board. Although the reorganisation of the Scottish Health Boards resolved questions of succession and entitlement, it did restore potential claims of the defunct Board that were already out of time (para. 127 of the decision).

Additional elements that were time-barred may not be added to the claim. However, once removed from the claim, the additional elements did not invalidate it entirely. Refinements to a claim are permissible, but additions and extensions are not (para. 128 of the decision).

The Appellant computed the claim figures by extrapolating from four base years. The FTT questioned the validity of this method of extrapolation for a period of 20 years, particularly when the four base years fell at uneven intervals (para. 135 of the decision).

In view of the above, the FTT dismissed the Health Board's claim.


Without supporting records, a late claim is always likely to fail. This decision is the latest in a series of appeals relating to late claims at the instance of the NHS:

  1. 1) St George's Healthcare NHS Trust TAX[2014] TC 03308, which concerned agreeing the quantum of the claim;

  2. 2) NHS Dumfries and Galloway Health Board TAX[2014] TC 03381, which concerned catering; and

  3. 3) NHS Lothian Health Board TAX[2014] TC 03397, which concerned capital expenditure.

There are those who regret that effectively one part of the government is arguing about a significant amount of tax with another part at significant cost in professional fees. Each public body has its own budget which apparently blinkers their attitude.


[1] This is a claim for repayment of input tax paid by the Greater Glasgow and Clyde Health Board. In addition to its non-business activities it has conducted to a limited extent business activities within the scope of the VAT system. This repayment claim is in respect of input tax incurred in relation to dining-room expenditure, residual revenue expenditure, and capital expenditure, and that over an extended period from April 1974 to April 1997. The repayment was refused by HMRC, and this appeal is directed against that refusal. It is the third in a series of appeals relating to Fleming-type claims at the instance of the Scottish Health Boards. In the earlier appeals at the instance of NHS Dumfries & Galloway Health Board and NHS Lothian Health Board the repayments sought related to respectively catering and capital expenditure. The subject-matter of this appeal is accordingly distinct. The appeal at the instance of Dumfries & Galloway HB succeeded. The other at the instance of Lothian HB did not, but an appeal to the Upper Tribunal is presently pending.

The law

[2] In addition to the relevant statutory provisions, particularly FA 2008 section 121, we were referred by each party to extensive case-law. We attach as appendices their lists of authorities. Particular reference should be made to the related appeals at the instance of NHS Dumfries and Galloway Health Board TAX[2014] TC 03381 and NHS Lothian Health Board TAX[2014] TC 03397.


[3] The Appellant's first witness was Stephen Shaw Forsyth, their expert witness, who had investigated the matters under review. He is an honours graduate in accountancy and finance and has qualifications in direct and indirect taxation. He is employed by Liaison as a VAT manager, working under the supervision of a more senior member of staff, Kenneth Lee. Mr Forsyth read and adopted his Witness Statement. He explained that he had revised its original form to take account of this Tribunal's decision in the earlier appeal at the instance of NHS Lothian.

[4] In summary Mr Forsyth was responsible for the preparation of the claim and dealt also with entitlement matters. The claim covers a 23 year period from 1974/75 to 1996/97 and is in respect of direct and indirect expenditure on overheads. It seeks to recover VAT attributable to taxable business activities. The claim in original form in March 2009 was for about £31/2m, £11/2m directly attributable and £2m indirect. A revised version was lodged in February 2011 with the removal of the final three years of the claim. Also there was an increase in the claim in respect of capital expenditure from 40% to 80% as it was discovered that this expenditure was not just construction works but also purchases of equipment which were standard rated.

[5] Mr Forsyth referred to the course of correspondence with HMRC. They had required a large amount of additional information. Obtaining this was time-consuming. Indeed the process of revising the claim, Mr Forsyth explained, had continued to date. (We would observe that Mr Forsyth produced revised calculations in April 2014 and June 2014 in the course of the hearing, which in her evidence Miss Langley (HMRC's expert and only witness: see para 42) described as the “third” and “fourth” versions, all as noted infra.) The direct tax reclaim related wholly to taxable supplies. The indirect claim was based on an apportionment between taxable income and total income. An income-based method of apportionment was adopted. Source material included the “Blue Books”, annual accounts, and related records and source materials. The Blue Books were prepared by the Scottish Health Services Common Services Agency Information & Statistics Division. They contain information relating to all the Scottish Health Boards. Various relevant records are kept in the Mitchell Library in Glasgow, where they were accessed by Mr Forsyth.

[6] Mr Forsyth sought to identify firstly input tax attributable to taxable income, both standard and zero-rated, from hospital dining-rooms. Business income in the context of this taxpayer would include that arising from staff and visitor catering. Patient meals were “non-business”. After investigation Mr Forsyth found about 20% of expenditure standard-rated and 80% zero-rated. Costs included foodstuffs and catering supplies and costs of running kitchens and canteens. For 2007/08 on his calculations 19.38% of expenditure was taxable at the standard rate, and for 2009/10 the percentage was 12.57%.

[7] Having regard to the VAT returns produced, he continued, the Trusts were recovering only VAT under contracted-out services (“COS”) and nothing relating to business activities.

[8] At page 106 of the Joint Bundle of Productions Mr Forsyth sets out his approach to the calculation. Firstly, he identifies staff dining-room expenditure from the Blue Books. Then he excludes wages. While food would be zero-rated, he then identifies the non-food element, taken to be inclusive of VAT. From that the recoverable VAT can thus be calculated.

[9] Mr Forsyth then addressed as a second category indirect tax recovery. Where input tax was not wholly attributable to non-business, exempt, standard-rated or zero-rated activity, it fell into residue (“the pot”). A deductible proportion can then be calculated as referable to taxable supplies. An income-based formula for apportionment had been suggested by HMRC and adopted by Liaison. A base line figure for 1999/2000 was adopted and an extrapolation made for earlier years.

[10] The business percentage of total income has to be calculated and then applied to the residual (or “non-attributable”) expenditure. 1999/2000 was taken as a base year as being the earliest on which accurate figures could be obtained. Income is then broken down into categories. Other than catering income the main sources of taxable income were property...

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3 cases
  • NHS Lothian Health Board v The Commissioners for Her Majesty's Revenue & Customs, TC 05971
    • United Kingdom
    • First-tier Tribunal (Tax Chamber)
    • 26 June 2017
    ...für Korperschaffen 1 in Berlin (Case C-141/00) 24. EC Commission v Italy (Case C-45/95) [1997] STC 1062 25. NHS Greater Glasgow & Clyde [2015] TC04324 UKFTT 119 (TC) 5 41 Legislation 1. The Value Added Tax (General) Regulations 1972 (SI 1972/1147) 2. The Value Added Tax (General) Regulation......
  • NHS Greater Glasgow and Clyde Health Board v Revenue and Customs Commissioners
    • United Kingdom
    • Upper Tribunal (Tax and Chancery Chamber)
    • 13 January 2017
    ...35 – Board's appeal refused. The Upper Tribunal (UT) dismissed the Board's appeal against the decision of the First-tier Tribunal (FTT) ([2015] TC 04324) to uphold HMRC's rejection of a late claim for repayment of VAT concerning dining room expenditure, residual revenue expenditure and capi......
  • NHS Lothian Health Board
    • United Kingdom
    • First-tier Tribunal (Tax Chamber)
    • 26 June 2017
    ...was asked about the availability of documentary records. These, he explained, in the cases of Greater Glasgow & Clyde Health Board TAX[2015] TC 04324 and NHS Lothian Health Board TAX[2014] TC 03397 were archived at respectively the Mitchell Library in Glasgow and in Edinburgh University Lib......

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