In The Isle of Wight NHS Trust v HMRC [2025] TC09640, the First Tier Tribunal ruled in favour of the Trust, finding that the supply of locums is an exempt service for VAT purposes.
The case concerned an appeal by the Isle of Wight NHS Trust against a decision made by HMRC in relation to the supply of locum medical practitioners from agencies to the Trust.
The case is significant as it is designated as a lead case for several other NHS trust appeals.
- The Isle of Wight NHS Trust believed that the supply of locums was an exempt supply under 'Item 5, Group 7, Schedule 9 Value Added Tax 1994.
- Item 5 states 'the provision of a deputy for a person registered in the register of medical practitioners' shall be exempt.
- HMRC disagreed and determined the supply to be taxable for VAT purposes.
- The tribunal looked at two issues:
- The correct interpretation of Item 5.
- Whether the Trust received services which should properly have been treated as exempt under Item 5.
To argue the case, HMRC relied on a recently discovered historic policy file containing documents relating to the scope of Group 7, Schedule 9 VATA 1994.
- HMRC claimed to be able to rely on these documents as they provided context and the nature of the mischief at which the legislation was aimed.
- These documents were known throughout the case as the 'forbidden' documents.
The tribunal found, in relation to point 1:
- HMRC's interpretation of Item 5, being that it exempts the supply of GP deputising services provided by a deputy, was incorrect.
- Applying the ordinary meaning, it is, 'Item 5 exempts the supply of a person appointed to represent or act on behalf of another (deputy) where that other is a person registered in the register of medical practitioners'.
- Given that meaning, Item 5 exempts the supply of a defined person, in any medical field and does not exempt the supply of the services that person has been appointed to undertake.
- Item 1 of the schedule already exempts the supply of medical services by a registered practitioner in this context.
- Had Parliament intended to only exempt GPs from VAT under Item 5, as suggested by HMRC, clear language would have been used to state this intention.
- In line with the application of Item 5, the Trust had been supplied with a registered medical practitioner to fill the post of a registered medical practitioner.
- That VAT had been incorrectly charged on the supply of the two consultants to the Trust.
In relation to point 2:
- There was sufficient evidence in the form of contracts, timesheets and an audit trail of documents for the court to determine that the roles filled by the two consultants supplied to the Trust had been 'requested and ordered' by the Trust.
- The Tribunal was therefore satisfied that the Trust demonstrated that it was the recipient of the services provided by the two consultants.
In relation to the 'forbidden' documents:
- HMRC could not rely on the 'forbidden' non-public and non-parliamentary documents.
- The meaning of Parliamentary documents can only be determined from publicly available material.
The appeal was granted.
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