In HMRC v NHS Lothian Health Board [2022] UKSC 28, the Supreme Court (SC) dismissed NHS Lothian's historic input VAT claims on the grounds that there was insufficient evidence to support the value claimed.

  • The UK VAT system was introduced in 1973.
  • Finance Act 2008 allowed for claims for input VAT incurred during accounting periods ending before 1 May 1997 to be made without any time limits, provided that the claims were submitted before 1 April 2009.
  • From 1974 to 1997, NHS Lothian operated a number of science labs that also provided services to fee-paying third parties. These sales were business activities and gave NHS Lothian the right to reclaim input VAT incurred on goods and services bought in the performance of those activities.
  • NHS Lothian submitted their claim, for an initial £7 million, in March 2009.
  • HMRC accepted that the claim was in time but disputed the evidence supporting the calculation of the input VAT. Insufficient explanations from NHS Lothian led to HMRC's rejection of the claim in December 2010.
  • NHS Lothian appealed to the First Tier Tribunal (FTT) and the Upper Tribunal (UT). Both appeals were dismissed. At this point, the value of the claim had been reduced to £900,000.
  • NHS Lothian then appealed to the Court of Session where the previous decisions were overturned and the case sent back to the FTT.
  • HMRC appealed to the Supreme Court.

The Supreme Court was critical of the Court of Session for misunderstanding the decision of the FTT and its confusion led to the wrong decision, in the opinion of the Supreme Court.

  • It held that the right to claim input VAT was inextricably linked to the accurate quantification of the amount claimed.
  • In the absence of primary evidence (invoices and sales ledgers) to support the claim, NHS Lothian's use of secondary evidence was permissible under s.24(6)(a) VATA 1994.
  • However, the documents provided did not show the actual amounts incurred or a credible alternative method of estimating that amount.
  • The EU principle of effectiveness did not apply as it was due to taxpayer failure that the amount had not been correctly recovered, not any failure, unlawful act or barriers imposed by the state.

HMRC's appeal was upheld.


This is a lead case for many NHS input VAT claims. It is estimated that these claims are worth approximately £38 million. Without robust supporting evidence, it would seem that these claims are certain to be rejected. As an underlying principle, it is also one to be borne in mind by anyone seeking to claim an input VAT repayment.

Useful guides on this topic

Starting in business: VAT
One of the first decisions to make when starting in business is whether or not you should register for VAT.  Am I running a business for VAT purposes and if so, when do I register?

Reclaims and unjust enrichment
When can VAT reclaims be made? What are the time limits? What is unjust enrichment? Why might unjust enrichment prevent HMRC from making VAT repayments? 

Input VAT: What constitutes a valid claim (& VAT invoice)
What is Input VAT? Who can claim it? What is needed for a valid claim? What needs to be included on a VAT invoice and can you make a claim without one? 

External link

HMRC v NHS Lothian Health Board [2022] UKSC 28 

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