The King (on the Application of Gloucestershire Hospitals NHS Foundation Trust) v The Commissioners for HM Revenue and Customs [2023] UKUT 00028 (TCC)
| Jurisdiction | UK Non-devolved |
| Judge | Mr Justice Leech,Upper Tribunal Judge Rupert Jones |
| Neutral Citation | [2023] UKUT 00028 (TCC) |
| Subject Matter | 30 January 2023 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Published date | 02 February 2023 |
UT Neutral citation number: [2023] UKUT 00028 (TCC)
UT (Tax & Chancery) Case Number: UT/2021/ 000155
Upper Tribunal
(Tax and Chancery Chamber)
Hearing venue: The Rolls Building,
London EC4
5,6,7 & 10 October 2022
Judgment given on 30 January 2023
Before
MR JUSTICE LEECH
JUDGE RUPERT JONES
Between
THE KING (ON THE APPLICATION OF
GLOUCESTERSHIRE HOSPITALS NHS FOUNDATION TRUST) Claimant
and
THE COMMISSIONERS FOR HIS MAJESTY’S
REVENUE AND CUSTOMS
Defendants
Representation:
For the Claimant: Owain Thomas KC, instructed by KPMG
For the Defendants: Peter Mantle, Counsel, instructed by the General Counsel and Solicitor for His
Majesty’s Revenue and Customs
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DECISION
I. Introduction
This is a claim for judicial review where the central issue is whether a single supply of
healthcare facility services has been made to the Claimant for the purposes of obtaining a refund of
Value Added Tax (‘VAT’) or whether there have been multiple and separate supplies of consumable
goods and healthcare facility services.
The Claimant, the Gloucestershire Hospitals NHS Foundation Trust (‘the Trust’), applies for
judicial review of the decision of the Defendants, the Commissioners for His Majesty’s Revenue &
Customs (‘HMRC’), dated 11 December 2020. HMRC decided that the Trust was not entitled to a
refund of VAT in respect of consumable goods (‘Consumables’) used in its operating theatres for
the treatment of patients that are provided to the Trust under a wide-ranging contract for the supply
of healthcare facilities by Genmed.Me Limited (‘Genmed’).
The VAT was charged to the Trust pursuant to an ‘Agreement for the Management and
Administration of Surgical Facilities’ dated 22 December 2017 (the ‘Agreement’). In summary the
Agreement provided that Genmed would supply the Trust with managed surgical theatre facility
services. The managed services include maintenance services, facilities and sterilisation services,
data analytics, stock control, management and other services necessary for a surgical theatre to be
available and ready for use. The services also include support services for the operation of the
theatre itself (cleaning, sterilisation, waste disposal and premises related services) and services
which relate directly to goods, such as stock management, IT services, catalogue management,
negotiating with and dealing with suppliers and product recall.
The goods which Genmed supplied to the Trust under the Agreement broadly consisted of four
categories: (i) structural items, furniture and operating systems, such as operating tables; lights,
generator machinery and heating and cooling equipment; (ii) re-useable operating equipment and
machinery, such as patient monitors, ultrasounds, anaesthetic machines, ventilators, microscopes
and scalpels; (iii) single use goods, which are used in the course of procedures on patients and
include items such as sutures, bandages and gauze; and (iv) protheses, such as hip and knee joints,
which are provided to patients during the course of surgery. Categories (iii) and (iv), i.e. the single
use goods and protheses, constitute the Consumables.
HMRC allowed the Trust a refund in respect of VAT paid on all the services and goods in
categories (i) and (ii) provided under the Agreement but refused a refund of VAT in respect of the
Consumables. In doing so HMRC decided that the VAT on the Consumables fell outside the
refunds available under Heading 45 of the Contracted-Out Services Direction (‘COSD’ or the ‘COS
Direction’) for healthcare facilities permitted by section 41(3) of the Valued Added Tax Act 1994
(‘VATA’) in relation to VAT chargeable on Government departments including NHS Foundation
Trusts.
HMRC refused to allow a refund insofar as VAT was incurred on the provision of
Consumables on the basis that they fall to be considered as a separate supply of goods from the
supply of fully functioning theatre facility services. Moreover, HMRC did not consider the supply
of those goods to be closely related to the supply of those services. The Trust claims that HMRC
have unlawfully decided that it is not entitled to a refund of the amount of VAT incurred on the
Consumables under the terms of the COS Direction. The Trust claims that the Consumables are part
of a single composite supply of services for VAT purposes where the services and goods are
practically and economically indissociable.
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II. The grounds for judicial review
The Trust has been granted permission to pursue four grounds for judicial review challenging
the lawfulness of HMRC’s decision. The first three grounds rely on the proposition that the decision
is simply incorrect in law and that for the purposes of the COSD regime the Trust is entitled to the
relief claimed. The fourth ground relies on a public law right of challenge which is free-standing.
The Trust claims as follows:
Ground 1: It is entitled to a refund of VAT in respect of the Consumables on the basis that the
supply falls within List 2, Heading 45 to the COS Direction (‘COSD 45’), which provides for
refunds on the operation of healthcare facilities and the provision of any related services.
Ground 2: Title to the Consumables does not pass from Genmed to the Trust under the Agreement
so that there is no supply of goods by Genmed to the Trust under the Agreement (the ‘Title Issue’).
But in any event the supply of the Consumables is an element of a single supply of managed theatre
services under the Agreement which falls within the description in COSD 45, namely, the operation
of healthcare facilities (the ‘Single Supply Issue’).
Ground 3: The supply of the Consumables is a supply of goods closely related to the supply of
managed theatre services and qualifies for a refund under paragraph 2(c) of COSD.
Ground 4: HMRC have adopted differential and inconsistent treatment for contracted out theatre
services such that its treatment of the Trust is unfair, irrational and an abuse of power.
III. The hearing
We had the benefit of four days of detailed oral argument from counsel during the hearing, in
addition to their helpful Skeleton Arguments. Both counsel referred to a wide range of statutory,
case law and legal materials, which were collected into the joint bundles of authorities which were
before us. We also had the benefit of a core bundle, comprising the witness statements and the other
principal documents in the appeal, and full bundles of all of the evidence. Neither party applied to
cross-examine any of the witnesses. Subject to questions of weight and emphasis, we accept the
evidence of all of the witnesses.
IV. The procedural background
There is no statutory or other right of appeal to the First-tier Tribunal (the ‘FtT’) against a
decision regarding non-statutory clearance under the Contracted-Out Services (‘COS’) regime.
Section 83(1) VATA lists the most relevant VAT decisions over which a taxpayer has a right of
appeal to the FtT and a decision to refuse a refund of VAT under COSD is not listed there.
Moreover, the VAT in question is not the Trust’s ‘input tax’. HMRC’s decision letter for this reason
contains no reference to any right of appeal. The Trust’s only remedy, in the absence of HMRC
making an assessment, is to challenge the decision by way of judicial review. In the event that
HMRC were to issue an assessment then there would appear to be a right of appeal to the FtT. This
position is agreed by HMRC.
Once judicial review proceedings were issued in the High Court, the Trust invited the
Administrative Court to transfer the claim to the Upper Tribunal (the ‘UT’) and that order was duly
made on 13 August 2021 pursuant to section 31A of the Senior Courts Act 1981. The UT granted
the Trust permission to pursue all four grounds on 8 September 2021.
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