Quantification of claim for underclaimed input VAT

NHS Lothian Health Board operated scientific laboratories during 1974 and 1997. 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. HMRC refused the claim. Both the First-tier and Upper Tribunals dismissed the taxpayer’s appeals so it appealed to the Court of Session.

The board said the First-tier Tribunal’s decision that the evidence was inadequate to allow a proper calculation of the claim was wrong. This was because the evidence produced was the best available and a reasonable methodology was suggested.

It was agreed that the taxpayer was entitled to claim the issue was the reliability of the supporting evidence. The reasons for the failure to reclaim input VAT on laboratory activities before 2006 resulted several factors including the failure of the UK to implement systematically...