Weekly VAT News

Northumbria Healthcare NHS Foundation Trust: VAT and hospital car parking – SC

Northumbria Healthcare NHS Foundation Trust considered that its provision of paid-for hospital car parking was not chargeable to VAT. HMRC disagreed, and the First-tier Tribunal and then the Upper Tribunal dismissed the Trust’s appeals. The Court of Appeal found in favour of the Trust on the basis that the Trust was not a taxable person in respect of this activity as it was acting as a public authority under a ‘special legal regime’, and that this would not lead to a significant distortion of competition. The Supreme Court has overturned this judgment. When determining whether a public body is acting under a special legal regime, the question is whether there is a legal obligation that governs or materially affects the way the body’s activity must be carried out. The Department of Health guidance on hospital car parks that the Trust followed did not impose legal obligations. Accordingly, the SC concluded that the Trust was not acting under a special legal regime. Given this finding, the distortion of competition point did not arise, but the SC went on to address it, and found that to treat the Trust as non-taxable would distort competition. The car parking was not restricted to hospital users, and the FTT had found that there was actual competition between the Trust’s car parks and nearby parking provided by private operators. This conclusion was one that the FTT was entitled to reach on the evidence before it. HMRC’s appeal was allowed. (Contact: Andrew Clarke)

TSI Instruments Limited: Import VAT recovery by a non-owner – FTT

TSI Instruments Limited imported scientific equipment into the UK for repair and servicing. TSI claimed the import VAT it paid on importation as input tax. HMRC considered that, in accordance with its internal manual VIT3300, TSI was not entitled to input tax recovery, as it was not the owner of the goods, and assessed TSI for £8.5m. The First-tier Tribunal has rejected TSI’s appeal against HMRC’s assessments. TSI argued that the import VAT could be recovered on the basis that there was a direct and immediate link between the costs of importation and TSI’s taxable transactions, being the repair services. In other words, import VAT could be claimed not only where there is a link between the cost or value of imported goods and a taxable person’s outputs, but that the link can also be established where the taxable person bears the costs of importation. The FTT disagreed, finding that, under EU and UK law, TSI was not entitled to claim the import VAT as it was not the owner of the goods, and the cost or value of the imported goods was not reflected in the price of the repairs carried out by TSI. The FTT considered that although the FTT’s 2023 decision in Piramal Healthcare UK Limited also concerned import VAT recovery by a non-owner, the decision was of limited assistance, as it did not consider the distinction between the costs of importation and the cost or value of the goods imported. The FTT dismissed TSI’s appeal. (Contact: Gareth Pritchard)

‘Kosmiro’: VAT liability of factoring activities – CJEU

‘Kosmiro’ is a Finnish company which provided debt factoring services, both invoice factoring (financing guaranteed by invoices) and trade factoring (where Kosmiro purchased the invoices and took on the risk of payment default). The CJEU has considered the VAT treatment of the ‘factoring commission’ payable by Kosmiro’s clients, which was a percentage of each debt based on the payment term and risk, and the ‘arrangement fees’, which were flat-rate charges payable for setting up the factoring process. The CJEU has held that, for VAT purposes, the trade factoring offering constituted a supply of services, for which the factoring commission and arrangement fees were consideration. The CJEU distinguished this scenario, where the debts were not yet due and there was nothing to suggest that they would not be repaid, from that in GFKL Financial Services, where the transfer of defaulted debts was held to be outside the scope of VAT. The CJEU also found that the factoring commission and arrangement fees, for both invoice factoring and trade factoring, were consideration for a single debt collection service, and therefore subject to VAT. The EU Principal VAT Directive’s exclusion of debt collection from the financial services exemption is unconditional and sufficiently precise to have direct effect. Accordingly, it could be relied upon by Kosmiro, even though it may not be possible to interpret Finnish law to conform with the Directive in this respect. (Contact: Peter White)

HMRC updates on VAT appeals

HMRC have updated their list of VAT appeals, setting out the status of appeals in recent cases that HMRC have lost, and which they consider have potential implications for other taxpayers. The update includes the information that HMRC will not be seeking to appeal in: Clatterbridge Pharmacy Limited on the VAT treatment of medication supplied to outpatients, Ferrero UK Limited on whether biscuits were partly chocolate-covered, Hotelbeds UK Limited on evidence for input tax recovery, and United Carpets (Franchisor) Limited on single or separate supplies. As referenced in the 20 October 2025 edition of Weekly VAT News, the Court of Appeal will be considering the approach to applications for late appeals, as HMRC have been granted permission to appeal in Medpro Healthcare Limited & Anor. (Contact: Donna Huggard)

Electronic invoicing – Deloitte article

Digital transformation in global tax policy is accelerating. With over 80 countries now requiring digital tax reporting, with most set to adopt electronic invoicing or reporting by 2030, tax authorities are gaining powerful tools to boost efficiency and compliance. However, recent surveys reveal that enthusiasm among global businesses for these digital initiatives is declining. A new Deloitte article, Digitalization of tax: Plugging into e-invoicing, examines the evolving landscape of e-invoicing, exploring both the challenges businesses face in its adoption and the broader opportunities it presents for digital transformation and innovation in tax compliance.

EU Deforestation Regulation webcast

On 4 November, there will be a Deloitte Netherlands webcast on EUDR – From insight to action. The Deloitte panel will discuss recently-announced simplifications, supporting technology, and practical readiness for businesses required to meet the due diligence statement filing obligations for their goods to enter the EU market.