Input tax recovery claims were not properly quantified

The NHS Lothian Health Board and its predecessors operated several scientific labs. Most of its supplies were non-business for VAT but some were business activities. The board did not reclaim the input tax on those supplies so made a Fleming claim for the whole period (FA 2008 s 121).

NHS Lothian did not have records to provide precise figures so it valued its claim by applying to the total amount of VAT incurred the percentage of its activity that was business activity for the year 2006-07 ie 14.7%. It used this as a baseline and adjusted to work out the proportion of total input VAT it was entitled to recover for each year over the claim period. HMRC refused the claim.

The First-tier and Upper Tribunals refused the claim but the Court of Session allowed it. HMRC appealed to the Supreme Court.

The Supreme Court said...