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HMRC v Northumbria Healthcare NHS Foundation Trust

In HMRC v Northumbria Healthcare NHS Foundation Trust [2020] EWCA Civ 874 (10 July 2020) the trust leased motor cars which it subleased to its employees under a salary sacrifice scheme. Employees could use the cars for both business and work purposes.

This arrangement brought into play various pieces of VAT legislation:

  • VATA 1994 s 24 and 26 which define input tax as being VAT incurred by a taxable person in the course or furtherance of a business and permit its recovery insofar as it relates to taxable business activities;
  • SI 1992/3222 (‘the blocking order’) which excludes from recovery 50% of the input tax incurred on the lease of a car unless it is intended for use wholly for business purposes;
  • VATA 1994 s 41 which permits inter alia NHS Trusts to recover VAT on services to be used for non-business purposes; and
  • SI 1992/630 (‘the...

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