UT/2023/000021 - [2024] UKUT 00334 (TCC)

The Trust’s essential point is that, when the contracts are considered in their wider context and economic reality, its provision of services to the relevant local authority is not properly regarded as “for consideration”. Crucially, the provision is by one public body to another of state funded public healthcare services that the NHS is legally required to make to patients who wish them. Given its functions and duties as part of the state-funded comprehensive public health service, the Trust submits that it is “highly-contrived” to say that there is a direct link between the sums it receives under “contracts” with local authorities and the supplies of services: 1) the sums paid reflect grants of public money, the contracts merely being mechanisms through which that public money is routed 2) the Trust is bound to provide the services “as part of its free, integrated, holistic and comprehensive healthcare provision” under the NHS Act and NHS Constitution and 3) the true recipients are individuals who pay nothing for the services – there is accordingly no “price” as such for the services which must be provided even if the “price” is insufficient to cover their cost.

HMRC’s core submission is that the necessary direct link is to be straightforwardly found in the agreements. Pursuant to these, the Trust is obliged to carry out specific identified services in compliance with specified service standards. In return for doing so, the Trust is entitled to payment from the local authority. There is nothing in the surrounding circumstances to vitiate the proper VAT analysis based on that contractual characterisation. The fact that the bodies and the funding of the services are public in nature is irrelevant under CJEU case-law. As Mr Mantle submitted for HMRC, this is not a “grant-funding with conditions” type of case.