In a significant judgment today, the UK Supreme Court has ruled in favour of HMRC in its long-running dispute with Northumbria Healthcare NHS Foundation Trust (“Northumbria”) about VAT on hospital car parking charges. This decision upholds HMRC’s position that income from NHS-operated car parks is subject to VAT, with broad financial implications for NHS Trusts across England.

Background

Car parking income generated by NHS Trusts has always been treated as subject to VAT at the standard rate (currently 20%). In February 2024, the Court of Appeal ruled in favour of Northumbria’s position that the income is non-business. It found that parking services provided by NHS Trusts fell outside the scope of VAT because they were supplied under a “special legal regime” and did not distort competition. However, HMRC appealed to the Supreme Court, which has now overturned that decision.

Key Findings

The Court found that while NHS Trusts must follow government guidelines on pricing and concessions, these are flexible recommendations, not legally binding rules. As such, the NHS is not operating under a “special legal system” for the income to be treated as non-business for VAT purposes.

Hospital car parks also compete directly with nearby private ones, as both offer the same basic service, i.e. convenient parking. If the NHS avoided VAT, it could lower prices or keep more profit, giving it an unfair edge, especially when demand far outstrips supply. This real risk of distorting competition means VAT must apply.

What This Means for NHS Trusts

This ruling creates a binding precedent requiring NHS Trusts to continue charging and accounting for VAT on car parking income. Trusts that had paused VAT payments or submitted refund claims based on the earlier Court of Appeal ruling will not recover that VAT and will now need to consider withdrawing or amending their claims.

The judgment means Northumbria’s claim will not be paid. Nor will the claims of around 70 NHS Trusts awaiting this judgment, which amounted to up to £100 million.

Effect on Car Park Construction Costs

The decision affirms that NHS car parking remains a taxable business activity, allowing Trusts to continue recovering VAT costs on construction and operational expenses. For those with substantial investments in car park infrastructure, this mitigates the risk of large VAT adjustments under the Capital Goods Scheme.

Trusts planning new car park developments can proceed with greater clarity, knowing VAT incurred on construction costs should be recoverable. However, they should still carefully assess contractual and operational models, particularly where third-party involvement is contemplated.

Recommended Next Steps

NHS Trusts should now take the following actions following the Supreme Court ruling:

• Ensure VAT is correctly accounted for on car parking income going forward.
• Consider withdrawing or revising any outstanding claims for VAT refunds on past income.
• Review input tax recovery assumptions on car park capital expenditure.
• Evaluate Partial Exemption methods in light of continued business treatment.
• Confirm third-party contracts align with VAT obligations and determine if restructuring is required.

Need Support?

The NHS VAT team at CRSTAX is available to help Trusts assess the implications of this ruling and provide ongoing VAT compliance support.

Read more on Car Parking

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.

 

Expanding Our Expertise in NHS VAT, Employment Taxes, Corporate Taxes, Land Taxes & Custom Duties

For years, CRS VAT has been the trusted partner for NHS bodies seeking to maximise VAT recovery, strengthen compliance, and reduce HMRC risks. From 1 October 2025, we will evolve into CRSTAX, reflecting our ability to deliver a broader range of tax services to the NHS while maintaining the same unrivalled VAT expertise you know us for.

This change brings together our established VAT specialists with experts from across our group, creating a single, dedicated team supporting NHS organisations covering all areas of taxation – including employment taxes, corporate taxes, land taxes, and customs duties.

Why the Change Matters for the NHS

We understand the pressures facing NHS finance teams – rising costs, compliance challenges, and the constant need to maximise savings. Employment tax obligations are growing more complex each year as well and even small errors can result in costly penalties and underfunding of vital services. With CRSTAX, you have a partner who not only understands the NHS but has the technical expertise to protect its financial future.

Our Expanded NHS Tax Services

As CRSTAX, we continue to offer our full suite of NHS VAT services – including recovery reviews, compliance checks, COS re-reviews, training, and HMRC enquiry support. Alongside this, our enhanced service portfolio now includes:

HMRC Compliance Reviews

HMRC continues to carry out compliance reviews of NHS organisations, often focusing on expenses and benefits, salary sacrifice, IR35 compliance, Construction Industry Scheme (CIS), and termination payments. Errors can lead to significant liabilities and penalties.

We have a proven record of achieving positive outcomes for NHS bodies. In one case, HMRC initially calculated a liability of over £400,000, but following our intervention the final settlement was reduced to just £30,000.

Expenses and Benefits

We advise NHS organisations on the full tax treatment of staff benefits – from salary sacrifice arrangements and staff awards to P11D reporting/payrolling of benefits and PAYE Settlement Agreements. This ensures benefits remain tax-efficient while fully compliant.

Status and Off-Payroll Working (IR35)

With the revised IR35 rules placing responsibility for assessing employment status onto NHS bodies, we provide practical support. This includes drafting or revising policies, assisting with individual status determinations, supporting SDS appeals, and managing HMRC disclosures.

Construction Industry Scheme (CIS)

NHS finance teams can often be unfamiliar with the complexities of CIS, leading to errors in reporting. We deliver training, audit checks, and practical guidance to ensure compliance – reducing the risk of penalties.

Termination of Employment

Payments made under settlement agreements or redundancy schemes can have complex tax implications. We advise NHS bodies to ensure these payments are structured correctly, avoiding unexpected liabilities.

Pension Planning and Education

Working closely with NHS finance and HR teams, we deliver pension education and tailored planning advice to ensure compliance and optimise staff outcomes.

Corporate Taxes

NHS organisations engaged in trading or commercial activities may face corporation tax obligations. We provide guidance on structuring, compliance, and disclosure to ensure that NHS bodies meet their obligations while minimising liabilities.

Land Taxes (SDLT, LTT, LBTT)

Property transactions such as lease arrangements, acquisitions, or disposals can give rise to Stamp Duty Land Tax (SDLT in England), Land Transaction Tax (LTT in Wales), or Land and Buildings Transaction Tax (LBTT in Scotland). Our advisers ensure that NHS organisations apply the correct tax treatment, claim available reliefs, and avoid costly errors.

Customs Duties

Where NHS organisations import medical supplies, pharmaceuticals, or specialist equipment, customs duties can apply. Our team advises on tariff classification, duty reliefs, and the correct use of import documentation to avoid overpayments or penalties.

Case Studies – Delivering Taxation Value to the NHS in Practice

• VAT COS Re-review Savings – Our secondary reviews frequently uncover £30K to £800K in additional recoveries, after a competitor has already completed a review.
• HMRC Settlement Success – As highlighted above, we reduced one NHS organisation’s HMRC liability from £400K to £30K, delivering immediate savings and future compliance confidence.
• Employment Tax Clarity – We have helped NHS bodies rewrite IR35 policies and successfully defend HMRC challenges, ensuring correct application without unnecessary costs.

Taxation Built for the NHS

Unlike generic tax advisers, CRSTAX is a dedicated full-taxes team focused exclusively on NHS organisations. Our advisers include Chartered Tax Advisers and former HMRC officers, combining frontline knowledge with practical sector experience.

This unique expertise ensures we don’t just identify issues – we deliver solutions that provide value and save money, improve compliance, and strengthen internal processes.

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.

HM Revenue & Customs has announced today that the end date for the temporary VAT zero-rating of supplies of Personal Protective Equipment (PPE) in connection with coronavirus has been changed from 31 July 2020 to 31 October 2020.

The zero-rate came into effect from 1 May and covers supplies recommended for use in connection with protection from coronavirus in guidance published by Public Health England.

This includes:

o disposable gloves
o disposable plastic aprons
o disposable fluid-resistant coveralls or gowns
o surgical masks – including fluid-resistant type IIR surgical masks
o filtering face piece respirators
o eye and face protection – including single or reusable full-face visors or goggles
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, please contact us.

HMRC has announced that the introduction of the DRC for construction services will be delayed for a further period of 5 months from 1 October 2020 until 1 March 2021, citing the impact of the coronavirus pandemic on the construction sector.

There will also be an amendment to the original legislation, to make it a requirement that for businesses to be excluded from the reverse charge because they are end users or intermediary suppliers, they must inform contractors in writing of this status.

The DRC is an anti-avoidance measure designed to remove the potential scope for VAT on construction services being ‘stolen’ from HMRC by unscrupulous contractors. The measure is designed to shift the accounting for VAT on supplies of construction services in certain circumstances onto the customer rather than the supplier.

NHS bodies are likely to be end-users in the majority of cases and given the requirement to inform contractors of this status, there is no ‘do nothing’ option. You will still need to prepare for implementation from March 2021 and getting this wrong could give rise to penalties. CRS VAT will provide further updates on the DRC and how it affects the NHS in the coming months. This will include working with clients to implement the changes and running seminars.

If you would like to read more, HMRC has published a new Revenue and Customs Brief (7/2020) about this, which can be found here:

https://www.gov.uk/government/publications/revenue-and-customs-brief-7-2020-domestic-reverse-charge-vat-for-construction-services-delay-in-implementation

Should you have any questions on the DRC and how it will affect your organisation please contact us.

HM Revenue & Customs announced on 30 April a temporary zero-rate of VAT on supplies of Personal Protective Equipment (PPE) in connection with coronavirus.

The zero-rate comes into effect from 1 May to 31 July 2020 and covers supplies recommended for use in connection with protection from coronavirus in guidance published by Public Health England.
These supplies are normally subject to VAT at the standard-rate, so this new relief will benefit NHS and other bodies not able to recover VAT on purchases.  This puts UK and EU supplies of PPE on a level footing with imports from non-EU countries, which were given temporary VAT and duty relief on 31 March.

The relief has been enacted by a Statutory Instrument which inserts a new Group 20 to Schedule 8 of the VAT Act 1994.

Products covered by the zero rate include:
o disposable gloves
o disposable plastic aprons
o disposable fluid-resistant coveralls or gowns
o surgical masks – including fluid-resistant type IIR surgical masks
o filtering face piece respirators
o eye and face protection – including single or reusable full-face visors or goggles

These temporary changes will not affect the VAT treatment of goods donated by a charity or from charitable funds, which are already zero-rated.  The supply of any goods in connection with the provision of care or medical or surgical treatment are also not affected, as such supplies remain exempt from VAT.
Details of the relief can be found here:
https://www.gov.uk/government/publications/revenue-and-customs-brief-4-2020-temporary-vat-zero-rating-of-personal-protective-equipment-ppe/revenue-and-customs-brief-4-2020-temporary-vat-zero-rating-of-personal-protective-equipment-ppe
We will inform you of any further VAT easements from the Government relevant to the NHS as soon as we hear.

HM Revenue & Customs (HMRC) has today announced some further easements in VAT accounting for the NHS due to the ongoing COVID-19 situation.
Full details of the easements are shown on the attached letter, but to summarise:
COS VAT estimation
It has been recognised that some organisations may not be able to submit accurate COS VAT claims.
Requests for estimations must therefore be made in advance of the due date for the return, with a proposed end date.  HMRC accepts that the end date may need amending due to the ongoing uncertainty.
HMRC has suggested the easiest and most reasonable method of estimation will be based on a representative period.
HMRC is still considering estimations for (business) input tax and output tax and will advise further in due course.  
6 month COS VAT extension
The annual COS VAT deadline for 2019/20 has been extended from the June 2020 VAT return to the December 2020 VAT return, (filing date 7th February 2021).  
This means that COS VAT incurred on invoices dated within 2019/20 can be claimed on any return up to December 2020.
This is a one-off extension, but will be reviewed given the current uncertainty surrounding COVID-19.
HMRC has not made any specific mention of an extension to end-of-year business and partial exemption adjustments, which themselves include end-of-year COS VAT adjustments, but we are awaiting further clarification of this point.

If you have any questions about anything in this alert, please contact us.

The Government is allowing NHS and other state and authorised non-state bodies to pay no import duty and VAT on protective equipment, relevant medical devices or equipment brought into the UK from non-EU countries during the coronavirus (COVID-19) outbreak.
It is unclear whether this relief will apply to subsidiary companies, but a non-state body can request authorisation by contacting the National Import Relief Unit (NIRU) by emailing niru@hmrc.gov.uk for an application form.
The relief will apply to imports of protective equipment, other relevant medical devices or equipment for the COVID-19 outbreak.

Full details of the relief and the relevant commodity code list you can claim relief on can be found here:

https://www.gov.uk/guidance/pay-no-import-duty-and-vat-on-medical-supplies-equipment-and-protective-garments-covid-19

Goods imported into the UK for donation or onward sale to the NHS are also eligible for this relief and can be imported free of import duty and import VAT.
The relief currently applies until 31 July 2020.  VAT on domestic supplies is not affected by this relief and VAT will still be charged as normal.
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, please contact us.

From April 2020 all 206 hospital Trusts in England will be expected to provide free car parking to groups that may be frequent hospital visitors, or those disproportionately impacted by daily or hourly charges for parking, including:

• Blue badge holders
• Frequent outpatients who have to attend regular appointments to manage long-term conditions

Free parking will also be offered at specific times of day to certain groups, including:

• Parents of sick children staying in hospital overnight
• Staff working night shifts

To date, most NHS car parks in England have been used to generate income by the NHS bodies that operate them and this income has been subject to VAT.  There have been very few exceptions allowing for free parking.  With the changes coming in from April 2020 NHS car parks shall become a mix of fee paying business use subject to VAT and free non-business use.  Accordingly when considering VAT on expenditure in relation to car parks, Trusts need to determine if the expenditure relates wholly to taxable business use (e.g. the purchase of a new pay machine) or non-business use (e.g. designated areas for free parking users only).

VAT incurred on wholly business use expenditure shall be recoverable in full as business input tax and VAT on wholly non-business use expenditure shall be determined for recovery under the contracted out services rules (“COS”).

Where the expenditure does not fall wholly as taxable business use or wholly as non-business use and is not recoverable under the COS rules the VAT will be considered as an overhead, to which the amount of deductible VAT by the NHS body shall need to be determined under the Trust’s annual business activities and partial exemption calculation. 

The capital goods scheme

The capital goods scheme (“CGS”) is applied to recognise the change in use of certain items of capital expenditure over a number years as there may be variations to the extent that the items are used to make taxable supplies.  For construction works costing over £250,000 (excluding VAT) the CGS adjustment period is 10 years. 

As the adjustment period is 10 years capital expenditure incurred on car parks completed before 31st March 2010 can be excluded from the change, as the 10 year adjustment period would have passed by the time the new car parking charges have effect. 

For capital expenditure on NHS car parks in England falling within the CGS rules, the change of use in car parks from wholly taxable business to partially non-business will trigger CGS adjustments. 

For example, suppose a new car park was completed in the 2018/19 financial year for a cost of £1m plus £200k VAT which would have been claimed in full.  For the 2019/20 financial year there would be no adjustment as the car park remained wholly taxable business use, but from April 2020 the car park was used consistently for free parking 10% of the time the NHS body would have to repay £2k of the VAT claimed each year over the next 8 years.

In order to determine if your Trust will be impacted by the change in parking charges through the Capital Goods Scheme you should consider:

1. If you have had capital expenditure in relation to car parks costing more than £250k in the last 10 years. 
2. Will those who are entitled to free parking use this car park? 
3. How will the Trust implement the new car parking charges rules? E.g. dedicated areas or will they park in the same locations?
4. Has the Trust carried out a review to estimate what percentage of car parking use shall be free from April 2020?

If you believe that these changes could affect your Trust, please contact us.