Weekly VAT News

Spectrum Community Health CIC: outsourcing primary healthcare in prisons – UT

NHS England engaged Spectrum Community Health CIC to deliver primary healthcare at prisons across the North of England (including nurses, GPs, pharmacies, mental and sexual health services, optometry, dentistry, and physiotherapy). Spectrum viewed its various services as separate, which meant that (although its services were mostly exempt healthcare) supplies of drugs should be zero-rated and sexual health products should be reduced-rated, meaning that Spectrum should be entitled to some input tax recovery. HMRC disagreed, and in 2022 the First-tier Tribunal dismissed Spectrum’s appeal. At the Upper Tribunal, Spectrum pleaded that the CJEU’s 1988 judgment in EC v UK (C-353/85) (as considered in Klinikum Dortmund) meant that goods should always be treated as physically and economically dissociable from medical services. In EC v UK, the CJEU ruled that the UK should not exempt supplies of goods such as spectacles that were provided alongside medical care (and the same approach would have justified Spectrum’s claim that its various services were separate). However, the difficulty with relying on such ancient authority is that it pre-dates cases such as CPP, Levob, Město Žamberk, and Frenetikexito which have established core principles in this area. The Upper Tribunal considered that EC v UK did not provide any grounds for departing from these more recent authorities in relation to medical services. Spectrum was making a single supply of healthcare services (as judged from the perspective of NHS England, which received the services), and was not entitled to recover input tax. Spectrum’s appeal was dismissed. (Contact: Phil Simmons)

Novo Nordisk AS: VAT on statutory payments to state health insurer – AGO

Prescription drugs in Hungary are partly paid for by patients, and partly subsidised by the NEAK (the state health insurance body). The NEAK may recover part of its subsidies from manufacturers through agreed volume rebates, and the CJEU has previously ruled that manufacturers should adjust their output tax accordingly (Boehringer Hungary). Manufacturers also have to pay up to a further 20% of the subsidy to the NEAK under Hungary’s law on the marketing of medicinal products. In Novo Nordisk, the CJEU is considering whether these statutory payments should be treated in the same way as volume rebates. Advocate General Ćapeta acknowledged that taxes paid by manufacturers may have to be included in the value of their supplies. So, if the statutory payment was a tax, then perhaps Novo Nordisk could not adjust its output tax. The AG noted that a payment obligation arising under the law was compulsory; and that it had a predetermined tax base and rate. However, in the AG’s opinion it should still not be classified as a tax unless it was foreseeable by taxpayers that it was a tax, and neither the wording of the statute, nor the accompanying explanatory memorandum, referred to it as a tax. Therefore AG Ćapeta concluded that it should not be treated as a tax for VAT purposes. Novo Nordisk should treat the statutory payment in the same way as a volume rebate, and adjust its output tax. (Contact: Chris Cherrill)

HMRC guidance: get your postponed import VAT statement – updated

HMRC have amended their guidance on getting a postponed import VAT accounting (PVA) statement. The 4 June 2024 edition of the guidance now includes an acknowledgement by HMRC that they are aware of problems some importers are facing when accessing their monthly PVA statements and that as long as importers “take reasonable care to follow this guidance, there will be no penalty for errors”. The guidance now states that PVA statements will usually be available to view by the tenth working day of the month, amended from the eighth working day stated in the previous guidance. Advice has also been included on what importers can do if they are not able to access PVA statements, namely that import VAT figures can be estimated. Estimates “should be as accurate as possible”, based on amounts paid for the goods and other costs, such as packaging, transport, and insurance. When the relevant PVA statement becomes available, the necessary adjustments must be made in the next VAT return. (Contact: Andrew Clarke)

This week’s VAT case calendar

On 10 June, the Upper Tribunal will hear the appeal against the First-tier Tribunal decision in TalkTalk Telecom Ltd on VAT and discounts. On 13 June, the CJEU will deliver its judgments in Adient on VAT fixed establishment and in C on VAT and administrators of insolvency proceedings.