Summaries of opinions (judgments) provide a short explanation of judicial decisions in order to assist understanding and may be published in cases where there is wider public interest. They provide the main findings, but do not form part of the reasons for the decision.

The judgment published on the Scottish Courts and Tribunals website is the only authoritative document.

NHS Trust Appeal - repayment of tax


Apr 9, 2020

An Appeal by an NHS Trust to recover £929,875 overpaid tax between 1974–1997 has been referred back to the First Tier Tribunal.


The overpaid tax relates to business carried out in laboratories involving supplies such as drug trials and water testing to third parties including local authorities and pharmaceutical companies.

The case is known as a ‘Fleming claim’ following a decision taken in the House of Lords in Fleming (trading as Bodycraft) and Condé Nast Ltd v HMRC, and was heard at the Court of Session after being appealed from the First Tier, and the Upper Tier, tribunals.

The tribunals had accepted that the NHS Trust, which covers the Lothian area, was entitled to make a claim for the historic repayment, but in the absence of full financial records, a legal dispute arose over whether it was possible to calculate the amount the claim should be in order to permit that repayment.

Records held by HMRC for the period before 1997 were destroyed, but the NHS Trust had provided financial details from the year 2006 -7 which they argued could be used to extrapolate relevant and limited financial information from earlier years.

The finances under question involved 44 laboratories which primarily carried out NHS work but also provided taxable business supplies. It was accepted that VAT-inclusive costs were incurred in order to make the supplies and that the input tax was recoverable.

The First-Tier Tribunal heard evidence from four scientists, who had worked in the NHS laboratories during the relevant time, and two accountants. They testified that business activities would not have changed markedly over the period in question.

However the Tribunal ruled that the evidence given was “not sufficiently precise” to use as a basis for the claim.

The case was then appealed to the Upper Tribunal where the ruling was upheld. A further appeal on a point of law was raised in the Court of Session.

This Court took into account the principle of effectiveness “based on the general proposition that, if a legal right exists, a remedy should be available to secure the practical availability of that right. Any requirements of proof must not make it excessively difficult to enforce the right.”

The Court also accepted that the responsibility for the NHS Trust failing to make a claim closer to the time when full evidence was available was in large measure the result of the failure of the United Kingdom to implement properly an EU law right to reclaim input tax.

The judgment adds: “In the case of NHS Boards and the Trusts that preceded them, there is the further factor that their VAT affairs were at one time under government control, and at that time, as a matter of policy, no attempt was made to recover input VAT in respect of laboratory activities.”

The Court ruled that the tribunals has imposed too high a test on the NHS Trust to provide financial evidence and that the case should be remitted to a differently constituted First Tier Tribunal for reconsideration. The ruling calls for the Tribunal itself to calculate, if necessary, the appropriate sum that should be reimbursed to the NHS Trust in relation to the overpaid tax.

Read the full Opinion on the SCTS website