Health services supplied to local authorities

As a result of changes to the Health and Social Care Act 2012 local authorities assumed responsibility for a range of health-related services previously provided by NHS bodies. The authorities could commission these from third parties as was the case in this appeal.

The taxpayer claimed the provision of such services to local authorities was a non-business activity because they were not for a consideration and even if they were they were not economic activity. It could therefore obtain a refund of input VAT on the supplies (VATA 1994 s 41).

HMRC disagreed. It said these were standard-rated business supplies.

The taxpayer sought judicial review.

The Upper Tribunal considered first the contractual position. It said ‘each of the contracts clearly reflects an obligation on the trust to provide services and an obligation on the local authority to make payment’. Further each contract contained termination provisions allowing...