Northumbria Healthcare NHS Foundation Trust
| Jurisdiction | UK Non-devolved |
| Judgment Date | 11 March 2021 |
| Neutral Citation | [2021] UKFTT 71 (TC) |
| Date | 11 March 2021 |
| Court | First-tier Tribunal (Tax Chamber) |
[2021] UKFTT 71 (TC)
Judge Greg Sinfield
Elizabeth Kelsey, counsel, instructed by Liaison VAT Consultancy Limited, appeared for the appellant
Howard Watkinson, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Value added tax – Whether supply of car parking services provided by NHS Foundation Trust was an economic activity – Directive 2006/112, art. 9(1) – Yes – Whether supplied under a special legal regime – VATA 1994, s. 41A – No – Whether supply was an activity closely related to hospital and medical care – Directive 2006/112, art. 132(1)(b) – No – Appeal dismissed.
The First-tier Tribunal (FTT) dismissed an appeal against a decision of HMRC to refuse a repayment of VAT previously accounted for on the provision of car parking. The Trust's supplies of car parking services were properly chargeable to VAT at the standard rate.
Northumbria Healthcare NHS Foundation Trust (the Trust) was established under the Health and Social Care (Community Health and Standards) Act 2003. Its statutory activities included the provision of hospital and community health services in Northumberland. It operated 14 hospitals and a number of smaller community hospitals and healthcare centres. It was common ground the carrying out of its statutory activities, including the provision of NHS medical services, were not an economic activity for VAT purposes, and their supply of private medical services were exempt from VAT.
The dispute arose in connection with pay-and-display car parking provided to patients, staff, visitors and other hospital attendees. Due to the limited availability of public transport, around 80% of people attending the main hospital sites did so by car.
The Trust's constitution provided, in addition to its principal activities, it could also carry on activities for the purpose of making additional income in order to better carry on its principal purpose.
Its car parking policy and procedures followed guidance provided by the Department of Health and NHS which stated that NHS organisations should work with their patients, staff, local authorities and public transport providers to make sure that users can get to the site and park as safely, conveniently and economically as possible. The Trust was therefore required by its stakeholders to ensure that its sites and services were accessible at reasonable cost. Some parking was provided free of charge, and staff payed reduced rates.
The demand for parking spaces was such that access to, and use of, the car parks had to be managed, particularly where the location of the site meant it could be used by people for general purposes unconnected with the Trust.
The Trust contended its supplies of car parking services were not subject to VAT on three grounds:
- The Trust was not to be regarded as a taxable person in relation to car parking services under Directive 2006/112, art. 13(1) and VATA 1994, s. 41A: or
- If the Trust was a taxable person in relation to the supply of car parking, it was an activity closely related to supplies of hospital and medical care and therefore exempt under art. 132(1)(b); or
- The supply of car parking services by the Trust did not constitute an economic activity.
The FTT considered the third ground of appeal first and followed the approach of the Court of Appeal in Wakefield College v R & C Commrs [2018] BVC 22. There was no doubt the Trust made supplies of car parking for consideration and for the purposes of obtaining income on an ongoing basis. The FTT rejected the appellant's contention the supply did not involve participation in any market. It was clear there was actual competition. The Health Technical Memorandum (HTM) intended to help NHS organisations identify best practice in car park management warned that sites close to city/town centres could be used by persons not attending the healthcare facility if the charges were lower than local car parks. This Trust had also had a specific issue with persons travelling from the local airport. The supply was therefore an economic activity.
In relation to the first ground of appeal, the Trust argued it provided the car parking services as a public authority and was not to be regarded as a taxable person. It therefore had to show it provided the car parking under a “special legal regime” applicable to it as a public authority. This was the case where transactions were carried out under a public law regime not applicable to private traders. If, on the other hand, the transactions were subject to the same legal conditions as apply to private traders they were not carried out under a special legal regime.
The appellant argued the provisions of the NHS Act constituted a special legal regime suggesting the considerations in the guidance related to car parking were not applicable to private economic operators. The Trust was also required to be accessible.
The FTT did not accept that was the case. The guidance issued by the NHS and Department of Health was guidance not a special legal regime. The fact that the Trust was required to take reasonable cost and local travel plans into account did not elevate the guidance to a public law regime. But even if the FTT were wrong on this point it concluded treating the Trust as a non-taxable person would lead to actual or potential distortions of competition that were more than negligible since they had already concluded the Trust participated in a market for car parking and there was actual competition between the Trust's car parks and parking provided by other operators nearby. It would therefore still fall outside the provisions of art. 13(1).
On the second ground of appeal, the FTT agreed VATA 1994, Sch. 9, Grp. 7, item 4 did not properly implement art. 132(1)(b) in that it referred only to goods but the directive referred to closely related “activities” which clearly contemplated goods or services. Applying the principles established inMarleasing SA v La Comercial Internacional de Alimentacion SA (Case C-106/89) [1990] ECR I-04135 a reference to services should therefore be read into item 4 to properly give effect to art. 132(1)(b). But, the FTT agreed with HMRC, the services were then subject to art. 134. Following Diagnostiko & Therapeftiko Kentro Athinon-Ygeia AE v Ipourgos Ikonomikon (Joined Cases C-394/04 and C-395/04) [2009] BVC 843 they had to be closely related to hospital and medical care, essential to the hospital and medical care, and their basic purpose could not be to obtain additional income through transactions in direct competition with commercial enterprises subject to VAT.
The FTT was not persuaded the car parking was an indispensable stage in the supply of hospital and medical services, for the purpose of achieving the therapeutic objectives of diagnosis, treatment and, in so far as possible cure of diseases or health disorders. It made accessing the hospital easier but the ability to park on site was not a necessary precondition or essential part of the diagnosis, treatment or care. Nor could it be said the provision of care by the Trust could not be assured without the supply of parking. Finally, the FTT had already found the purpose in providing car parking facilities was to obtain additional income for the Trust.
The FTT therefore concluded the supply of car parking services by the Trust constituted an “economic activity” carried on by the Trust as a taxable person and those services were not activities closely related to exempt hospital and medical care. The Trust's supplies were chargeable to VAT at the standard rate.
Appeal dismissed.
This detailed and comprehensive rejection of all the grounds put forward by the appellant will no doubt come as a major disappointment, particularly as there are a large number of similar appeals by NHS bodies stayed behind this one.
[1] Northumbria Healthcare NHS Foundation Trust (the “Trust”) charged patients, visitors, hospital staff and others for the right to park vehicles at some of its sites. This appeal concerns the VAT liability of car parking provided by the Trust.
[2] The Trust was established under the Health and Social Care (Community Health and Standards) Act 2003. The Trust's statutory activities include the provision of hospital and community health services in Northumberland.
[3] The Trust operates 14 hospitals which include North Tyneside General Hospital, Hexham General Hospital, Wansbeck General Hospital, Northumbria Specialist Emergency Care Hospital and Berwick Infirmary. The Trust also operates from a number of smaller community hospital facilities and healthcare centres including Rothbury Community Hospital, Haltwhistle War Memorial Hospital, Blyth Community Hospital, Morpeth NHS Centre, the Whalton Unit and Alnwick Infirmary.
[4] It was common ground that the carrying out by the Trust of its statutory activities, including the provision of NHS medical services, is not an economic activity for VAT purposes because such activities are non-business or outside the scope of VAT. The Trust's supply of private medical services is an economic activity but is exempt under the medical services exemption in article 132(1)(b) of Council Directive 2006/112/EC (the Principal VAT Directive or “PVD”) as implemented in the United Kingdom by item 4 of group 7 of Schedule 9 to the Value Added Tax Act 1994 (“VATA”).
[5] At some of its sites, the Trust provides pay-and-display car parking to patients, visitors, hospital staff, both clinical and non-clinical, and other hospital attendees such as contractors etc. The Trust accounted for VAT at the standard rate on the fees that it charged for parking. In 2017, the Trust submitted a claim, under section 80 VATA, for repayment of VAT accounted for on the provision of car parking (among other matters no longer in dispute) which the Trust...
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Northumbria Healthcare NHS Foundation Trust v R & C Commissioners
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Northumbria Healthcare NHS Foundation Trust v R & C Commissioners
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