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In a decision of significance for public bodies, the Court of Appeal has held that HMRC has power to raise assessments against public bodies who have been overpaid VAT refunds under section 41 of the Value Added Tax Act 1994.
Milton Keynes Hospitals NHS Foundation Trust argued that HMRC’s power to make an assessment under section 73 (2) of the Value Added Tax Act 1994 did not apply where the person to whom the refund was made under section 41 (3) is not a taxable person as regards the supplies which were the subject of the refund. They contended that the effect of the Principal VAT Directive and the domestic legislation implementing it is to put a public body performing statutory (non-business) functions outside the scheme of VAT.
The Court of Appeal dismissed the Trust’s appeal.
Valentina Sloane QC represented HMRC at all stages. A link to the decision by the Court of Appeal is here.