Updated: 28 October 2025 (UK).

Executive summary

• In February 2024, the Court of Appeal found that income from an NHS-operated car park is outside the scope of VAT, because the NHS is acting as a public authority under a “special legal regime” (including the NHS 2015 Parking Principles).
• HMRC appealed. The Supreme Court heard the case in April 2025, and judgment is still pending at the time of writing.
• Around 50 NHS Bodies are understood to have claims “stood behind” the Northumbria case, with tens of millions of pounds of VAT potentially recoverable across the NHS. The Court of Appeal’s reasoning concerns NHS-operated car parks only.

While the final position awaits the Supreme Court outcome, NHS Bodies should protect their claims, evidence their “public-authority” framework, and plan for both outcomes to minimise risk and preserve value.

What the dispute is about (in plain English)

The question: Are NHS hospital car-parking charges a taxable supply for VAT, or are they outside the VAT system because the NHS provides parking as a public authority under a special legal regime?

The Court of Appeal’s answer (Feb 2024):

• The provision of hospital parking operated by an NHS trust is sufficiently bound up with the NHS statutory framework (including the 2015 Parking Principles), so the NHS Body is acting as a public authority for this activity and is not a taxable person in that context.
• There is no material distortion of competition from this treatment, given the nature of hospital parking (primarily for patients, visitors and staff) and the limited overlap with commercial car parks.

Scope matters: This decision focused on NHS-operated car parks.  Car parking provided by an outsourced provider or by a PFI company is unaffected, as they are not public authorities.

Current status and why it matters

• Timeline so far: First-tier and Upper Tribunals originally found for HMRC; the Court of Appeal reversed that in February 2024; HMRC appealed to the Supreme Court; the hearing took place in April 2025; judgment is pending.
• Financial exposure/opportunity: Many trusts have lodged “stood-behind” claims. Sector commentary has placed the historic VAT at stake in the tens of millions of pounds, with some trusts facing material cash impacts depending on the final outcome.
• Operational impact: Pricing displays, signage, websites, back-office systems, and communications with patients and staff may all need rapid changes once the final decision lands.

Practical guidance for NHS VAT officers

1) Claims management and deadlines

• Protect time limits now. If your Trust has historically accounted for VAT on car-park income, ensure protective claims (or updates to existing claims) are submitted on time. Late claims risk being out of time.
• Keep claims live and evidenced. Maintain a clear technical narrative, calculations/interest workings, and supporting documents so your claim can be processed quickly once the court position is final.

2) Review how each car park is operated

• NHS-operated sites: Assemble an evidence pack that links operational decisions to the NHS statutory framework and the 2015 Parking Principles (governance, pricing policies, concessions, patient-first considerations, equality and access measures, board minutes, SOPs).

3) VAT accounting and future treatment

• Interim approach: Where the treatment is uncertain pending judgment, document your position, maintain robust reconciliations, and keep system changes scoped so you can pivot quickly.
• Pricing & comms readiness: Prepare two switch plans (NHS wins vs HMRC wins) covering: POS systems, e-commerce, tariff boards/signage, patient and staff communications, and website copy.

4) Wider impact and planning

• Look beyond parking. Map other income streams that may share public-authority characteristics or sit within a special legal regime and assess whether similar arguments might apply—and where competition concerns could differ.
• Consistency of evidence. Create a standard “SLR evidence bundle” across sites: policy documents, concession frameworks, traffic/occupancy data, clinic patterns (e.g., oncology/renal), and local transport context.

Action checklist (this month)

Protect the past

• Catalogue car-park income by site and operating model (NHS-operated vs outsourced).
• Submit or update protective claims with schedules, calculations and interest.

Evidence the “public authority” framework

• Collate the Parking Principles compliance trail (policy approvals, pricing rationale, concessions, patient/staff priority, equality/access considerations).
• Keep meeting notes and decisions that show the statutory and patient-first lens.

Plan for both outcomes

• If HMRC wins: prepare to re-impose VAT swiftly, refresh signage/web copy, re-train cashiers and update POS.
• If the NHS wins: prepare to remove VAT, consider tariff recalibration, and trigger repayment workflows where appropriate.

Align stakeholders

• Brief Finance, E&F, Procurement, Patient Experience and Comms teams. Establish a single source of truth for treatment, evidence, and messaging.

NHS Car-Parking VAT FAQs

Does this apply if our car park is fully outsourced?
Not automatically. The Court of Appeal focused on NHS-operated car parking. Outsourcing, PFI or PPP structures may point to a different supplier, pricing control, and risk profile, which can change the VAT analysis.

Can we stop charging VAT now?
Some Trusts have adjusted in anticipation; others are awaiting the Supreme Court decision. Your decision should balance litigation risk, cash impact, operational change costs, and the strength of your evidence, and it should be documented.

We’ve already filed a claim—what next?
Keep it current and well-evidenced. The best-prepared claims will progress faster once judgment is released.

How CRSTAX can help (NHS-specialist VAT)

Parking VAT Rapid Review (2–3 weeks)

• Site-by-site operating model map, claims triage, and an SLR evidence pack aligned to the Court of Appeal reasoning.

Protective Claims & Calculations

• End-to-end quantification (including interest), technical narrative, and ready-to-file schedules.

Board & Audit Committee Briefing Pack

• A balanced risk/options paper, cash-flow modelling, signage/website changeover plan, and communications templates.

Ready to protect your position before judgment?

1) Rapid Parking VAT Review (free scoping call)

Get a 20-minute triage with our NHS VAT lead: confirm eligibility, map your operating models, and agree next steps. [Button] Book your slot

2) Claims & Evidence Pack Builder

We compile the SLR evidence bundle (Parking Principles, governance, pricing, concessions) and quantify recovery with interest. [Button] Request a proposal

3) Outsourcing/PFI Diagnostics

Not NHS-operated? We’ll analyse contracts, pricing control and supply chains to validate treatment, or design the compliant alternative.

 

Yesterday the Chancellor of the Exchequer, Rishi Sunak, announced specific VAT cuts to help the hospitality sector across the UK recover from the effects of lockdown. Whilst these measures have been brought in principally to support the high street they nonetheless also apply to hospitality services provided by public bodies, including the NHS.

From 15 July 2020 until 12 January 2021, the reduced rate of VAT (5%) will apply to supplies, across the UK, of:

• food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises
• accommodation and admission to attractions

Temporary VAT cut for supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises

HMRC has published amended VAT Notices detailing supplies to which the temporary reduced VAT rate would apply and confirmed that supplies in the course of catering shall be subject to the temporary 5% reduced rate of VAT, including:

• Hot and cold food for consumption on the premises on which they are supplied
• Hot and cold non-alcoholic beverages for consumption on the premises on which they are supplied
• Hot takeaway food for consumption off the premises on which they are supplied
• Hot takeaway non-alcoholic beverages for consumption off the premises on which they are supplied

The ‘premises’ to which HMRC refer in their guidance are the areas occupied by the food retailer or, any area set aside for the consumption of food by the food retailers’ customers, e.g. a restaurant or café area.

Supplies from vending machines follow the same general principles as food and drink supplied from catering outlets, as such where typically standard rated items (e.g. crisps, confectionery, beverages, etc) are purchased from a vending machine sited in a catering premise these supplies would benefit from the temporary reduced rate of VAT. However, the same type of supplies (crisps, confectionery, beverages, etc) purchased from a vending machine sited in thoroughfares and areas not designated for the consumption of food follow the VAT liability of the product sold, i.e. taxable at the 20% standard rate of VAT.

The zero rating for cold take away food still applies, as such if you have an agreed cold take away food percentage with HMRC this should still be used to apportion sales between the reduced rate of VAT and the zero rate of VAT when calculating the output VAT payable.

Temporary VAT cut for supplies of accommodation and admission to attractions across the UK

HMRC has confirmed that the temporary 5% reduced rate shall benefit hotels, inns, a boarding house, or similar establishments, when supplying:

• Sleeping accommodation, including bathrooms, living rooms and suites
• Accommodation used for the supply of catering
• Rooms provided with sleeping accommodation

Please note, the temporary reduced rate of VAT only applies to supplies of land and property that are currently chargeable at the standard rate of VAT. Accordingly, supplies of land and property that has not been subject to an option to tax shall remain an exempt supply, as would residential accommodation charges.
We will inform you of any further VAT easements from the Government relevant to the NHS as soon as we hear.

If you have any questions about anything in this alert or would wish to discuss further please contact us.

The First Tier Tribunal (FTT) has published its findings in respect of North Lincolnshire and Goole NHS Foundation Trust appeal.

This is encouraging news for NHS Trusts which still have outstanding ‘Fleming’ VAT claims which are dependent upon HMRC accepting ‘entitlement’.

We submitted claims to HMRC on our client’s behalf back in 2009, for various types of overpaid or under recovered VAT dating as far back as 1973. This was following the judgment of the House of Lords in the joined cases of Fleming/Condé Nast in 2008, which found that the way HMRC introduced the capping provisions (back in 1996 and 1997) had been unlawful at the time. These were commonly referred to as the ‘Fleming claims’.

Some of these claims have already been paid in part, in particular those for overpaid catering output tax, but only where HMRC agreed the quantum of the claim and the entitlement from the date of the Trust formation.

Claims for earlier periods were rejected on the grounds that HMRC did not believe the entitlement for earlier periods relating to predecessor NHS bodes was transferred to the Trusts.

Other types of claims were rejected in full, in particular, those for input VAT on drugs and prostheses supplied to private patients, (referred to as Wellington/BUPA VAT claims). This was following the Nuffield FTT decision in 2013 where HMRC’s argument that these claims were invalid was upheld. The Nuffield appeal was the lead case for all appeals against HMRC’s rejection of the drugs and prostheses claims, including NHS appeals.

The North Lincoln and Goole case was the lead case dealing with the question of whether there was a transfer of rights to VAT claims from predecessor bodies to the current NHS Trust.

Therefore, any Trust with an outstanding claim which is dependent upon the entitlement issue could now receive a further VAT refund.

HMRC could still seek to argue that this does not set a precedent, but we will let you know as soon as HMRC’s view of the decision to the wider NHS becomes known. If HMRC does now agree that this decision has wider application for the NHS, we will make arrangements to agree the quantum of the claims now due to our clients.

As most NHS bodies are aware, HM Revenue & Customs (HMRC) has been actively reviewing the interpretation of the Treasury Direction COS VAT guidance.  This is following the aborted attempt earlier this year to impose the more restrictive Government Department (GD) rules on the NHS.  At the time, HMRC was forced to back down and instead consult with the NHS before making any changes.

It was originally anticipated that the revised guidance following the consultation would be part-published in November 2014 incorporating both GD and NHS bodies, however, we have now been informed that the publication date has been put back to mid-January 2015.

Specific items which could be subject to change include:

COS Heading 52 – Professional Services

This is likely to be restricted to ‘advice’ or ‘opinion’ only.  NHS bodies may no longer be able to recover VAT on consultancy costs for implementing changes, including legal representation or professional fees related to capital projects.

COS Heading 31 – Laboratory Services

Following the GSTS Tribunal decision earlier this year that pathology testing involving patient samples is exempt from VAT, the scope of this heading is being reviewed.  This may mean that VAT charged on outsourced laboratory facilities (including equipment, management, reagents, maintenance, training, etc.) may no longer be eligible for recovery under this heading.

COS Heading 45 – Healthcare Facilities

In a letter recently issued to the HFMA, HMRC implied that a ‘healthcare facility’ was a physical building, unit or area within a building which is run/operated by the contractor which enabled the NHS body to occupy the facility to deliver healthcare.  This definition would mean that COS heading 45 would still cover PFI hospitals and other similar facilities, but may well exclude managed facility contracts which are heavily based upon the provision and availability of equipment and consumables.
Other areas potentially subject to change include:

COS Heading 10 – Catering Services

This may now be extended to supplies of catering staff.

COS Heading 14 – Computer Services

This may exclude private data lines, which were specifically included in the previous NHS guidance.

Our initial thoughts are that the anticipated changes will significantly restrict the scope for VAT recovery of NHS bodies, many of which are already in serious financial difficulty.  We will issue a further update once we have more information.

HM Revenue & Customs (HMRC) issued a letter to the NHS in December 2013 stating that the proper tax point (time of supply) rules should be applied to Contracted-out services (COS) VAT recovery.  This meant that COS VAT should be claimed on the VAT return for the period in which the invoice is dated, or by the annual deadline at the latest.  In the same letter, the annual COS deadline was extended a further month to 31 July.

Historically, NHS bodies have recovered COS VAT on a return relating to either the period in which the invoice is dated (registration), the period the invoice was approval for payment, or the period in which the invoice is paid.  This has meant that if an invoice is in dispute, the VAT may not have be claimed until several months or even years after the tax point date.

Following various representations made about the timing of HMRC’s proposed changes and the lack of any transitional period, HMRC has now ‘relaxed’ this tax point rule for the time being.  This means that NHS bodies can continue to recover COS VAT at the time an invoice is paid, irrespective of the tax point date.

HMRC has told us that as part of the ongoing review of NHS and Government VAT following the recent publication of interim guidance, further guidance will be issued in the coming months making it compulsory for the NHS to adopt the tax point rules, with a likely start date from April 2015.

We would therefore recommend that the tax point rules are adopted as soon as possible, to ensure that COS VAT on invoices dated prior to April 2014 but not yet approved or paid is not lost.  Any NHS body which has already adopted the tax point rules should continue to use this method.

In summary, at present any COS VAT incurred on invoices paid within the 2013/14 financial year must be claimed by the 31 July 2014 deadline irrespective of the tax point.  Going forward, it is recommended to adopt the tax point rules as soon as possible to avoid any potential loss of VAT recovery.