NHS Ayrshire & Arran Health Board v The Commissioners for HMRC
| Judge | TRIBUNAL MEMBER SONIA GABLE JP |
| Judgment Date | 01 May 2025 |
| Neutral Citation | [2025] UKFTT 502 (TC) |
| Year | 2025 |
| Court | First-tier Tribunal (Tax Chamber) |
| Counsel | For |
| Date | 01 May 2025 |
Neutral Citation: [2025] UKFTT 00502 (TC)
Case Number: TC09511
FIRST-TIER TRIBUNAL
TAX CHAMBER
Appeal reference: TC/2021/02482
VALUE ADDED TAX – ZERO-RATING – whether construction services and materials in
the course of constructionof part of aNationalSecureAdolescentInpatientService
building were subjecttozeroratingforthepurposesofVAT–whetherpartofthis
building was intended for use solely for a Relevant Residential Purpose – no – whether the
whole building was intended for use as a hospital or similar institution – yes – Schedule 8,
Group 5, Item 2 (a), Notes (4) and (10), Value Added Tax Act 1994 – Appeal dismissed.
Heard on: 12,13 December 2024
Judgment date: 1 May 2025
Before
TRIBUNAL JUDGE RUTHVEN GEMMELL WS
TRIBUNAL MEMBER SONIA GABLE JP
Between
NHS AYRSHIRE & ARRAN HEALTH BOARD
Appellant
and
THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS
Respondents
Sitting in public in Glasgow on 12 and 13 December 2024
Representation:
For the Appellant:Martin Kaney, Director of X-VAT Limited.
For the Respondents: Paul Marks, Litigator of HM Revenue and Customs’ Solicitor’s
Office.
DECISION
INTRODUCTION
1.The Appellant appealed against the Respondents’ decision to refuse non statutory clearance
to treat the construction services and materials in the course of the construction of part of a building
for a National Secure Adolescent Inpatient Service (“NSAIS”), later named ‘Foxgrove’ as subject
to zero rating for the purposes of Value Added Tax (VAT).
2.NSAIS is a secure unit constructed in the grounds of Ayrshire Central Hospital.
3.TheAppellantseekspartialzeroratinginrelationtowhatitconsidersisadistinctand
separate part of NSAIS, referred to by witness Fraser Bell as the Accommodation or Bedroom
Wing (“the Bedroom Wing”), which is to be used only for a Relevant Residential Purpose (“RRP”)
in terms of Schedule 8, Group 5, Item 2 (a), Notes (4 ) and (10), Value Added Tax 1994 (“VATA”).
4.The Respondents maintain that the zero rating in terms of Notes (4), and (10) is not available
because NSAIS is a “hospital or similar institution”.
BACKGROUND
5.On 11 February 2020, the Appellant sought non statutory clearance to treat building costs for
NSAIS as zero-rated and on 9 November 2020, clearance was refused.
6.On 26 February 2021, the Appellant requested a statutory review of the decision and on 11
June 2021, the Review Conclusion Letter upheld the decision.
7. On 8 July 2021, the Appellant appealed the decision to the First-tier Tribunal and on 9
January 2022, the Appellant submitted further grounds of appeal.
8.The hearing took place over two days and was heard by the tribunal (“the
tribunal/we/us/our”) with the ability for it, as well as the parties, to receive evidence and
submissions and question the parties to establish the relevant facts.
9.Onthe first day of the hearing, the tribunal raised the issue of whether there was any
relevance to thefact that allpersons aged between12 and 17years of age,referred to inthe
Criminal Procedure (Scotland) Act 1995 (“the 1995 Act”) as “persons” and in the Mental Health
(Care and Treatment) (Scotland) Act 2003 (“the 2003 Act”) as “patients” (hereinafter, for
simplicity, collectively referred to as “patient(s)”), were sent to NSAIS underthe mental health
legislation which referred to treatment in a hospital and requested submissions. (The 1995 Act and
2003 Act are collectively hereinafter referred to as “the mental health legislation”)
10.On the second day of the hearing both parties made submissions on this point but given the
limited time they had available, the tribunal agreed to allow them to make written submissions on
this, and only on this, and said it would issue written directions allowing for a 14-day period for the
Appellant to make submissions, with the Respondents being given 7 days in which to respond.
11.The Tribunal Judge contacted HM Courts and Tribunals Service (“HMCTS”) on 15
December 2024, setting out the directions that were to be issued.
12.These directions were not issued by HMCTS until the Tribunal Judge chased them up and
asked HMCTS on 15 January 2025 whether there had been any responses.
13.The Directions were then issued on 17 January 2025 but by that time the Appellant had,
without awaiting the Directions and contrary to what had been requested at the hearing, submitted
1
not only submissions on the mental health legislation issue but also ‘Final written submissions’. As
the latter had not been requested at the hearing, the Respondents then requested additional time in
which to respond and in any event provided a response.
14.In accordance with the Overriding objective of the tribunalat Rule 2 of The Tribunal
Procedure (First-Tier Tribunal) (Tax Chamber) Rules 2009, and as the purpose of the two day
hearing was to give the tribunal, and the parties, the advantages of an oral hearing rather than a
hearing based on written submissions, the Tribunal will not consider the final written submissions
from the Appellant and the subsequent response from the Respondents, and will rely on the
skeletonarguments, evidence and oral submissions at the hearing, except for the submissions
requested at the hearing and referred to in the Directions issued on 17 January 2025.
POINTAT ISSUE
15.The substantive issue before the tribunal is to determinewhether NSAIS is a hospital or
similar institution in which case supplies are not zero-rated , or whether the Bedroom Wing, which
surrounds, on three sides, a therapy court and which was marked in yellow on a site plan (“the
yellow zone/accommodation wing”) submitted to the tribunal, is a distinct and separate part of the
building designed or intended to be used solely for a RRP, in which case zero rating is granted.
BURDENOF PROOF
16.The burden of proof is on the Appellant to show that the Bedroom Wing of NSAIS qualifies
for zero rating on the basis that it is intended for use for a RRP.
STANDARDOF PROOF
17.The standard of proof is the ordinary civil standard, on the balance of probabilities.
LEGISLATION AND AUTHORITIES
Legislation
18.Under VATA Schedule 8 Group 5 Item 2: zero rating applies to
2. The supply in the course of the construction of–
(a) a building designed as a dwelling or number of dwellings or intended for use solely for a
relevant residential purpose or a relevant charitable purpose; or
(b) any civil engineeringworknecessaryforthedevelopmentofapermanentparkfor
residential caravans, of any services related to the construction other than the services of an
architect, surveyor or any person acting as a consultant or in a supervisory capacity.
(“Item 2”).
19.VATA Schedule 8 Group 5 Item 2 Note (4) states:
(4) Use for a relevant residential purpose means use as–
(a) a home or other institution providing residential accommodation for children;
(b) a home or other institution providing residential accommodation with personal care for
persons in need of personal care by reason of old age, disablement, past or present
dependence on alcohol or drugs or past or present mental disorder;
(c) a hospice;
(d) residential accommodation for students or school pupils;
2
Get this document and AI-powered insights with a free trial of vLex and Vincent AI
Get Started for FreeStart Your 3-day Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your 3-day Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your 3-day Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your 3-day Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your 3-day Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting