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Article summary

The Supreme Court has unanimously upheld HMRC’s appeal in the case of NHS Lothian Health Board. The Court held that NHS Lothian had failed to adequately quantify its VAT input tax recovery claims. Its claims were therefore invalid as proof of the amount incurred is a substantive precondition for the right to recover VAT. Although the VAT recovery claims related to historic periods, the Supreme Court held that the standard of proof applied to NHS Lothian’s claim is the balance of probabilities which applies in the same way to all historic tax claims and this did not create an unjustifiable hurdle. Similarly, although UK VAT law and practice in this area had shifted, the Supreme Court held that state fault did not contribute to the difficulties in quantifying the VAT recovery claim. As a result, the Supreme Court overturned the Inner House’s decision and endorsed the decisions of the First-tier Tribunal and Upper Tribunal that NHS Lothian’s VAT recovery...