- VAT Calculation and Rebates: The First Tier Tribunal (FTT) ruled that rebates paid by Boehringer Ingelheim Limited (BIL) to the Department of Health and Social Care (DHSC) under UK voluntary schemes should be included in the VAT calculation for sales to the NHS, leading to a £21.5 million VAT refund for BIL.
- Background of the Case: BIL, a pharmaceutical manufacturer, participated in the Pharmaceutical Price Regulation Scheme (PPRS) and the Voluntary Scheme for Branded Medicines Pricing and Access (VPAS), which capped the sales price for branded medicines supplied to the NHS, necessitating rebate payments for amounts exceeding the cap.
- FTT’s Analysis: The FTT found that the rebate payments reduced the consideration received by BIL for its supplies, citing European case law that supports adjusting the VAT calculation based on post-supply discounts, including previous CJEU cases involving similar scenarios in Germany and Hungary.
- Rejection of HMRC’s Arguments: HMRC’s claims that the DHSC was not the final consumer and that BIL would be unjustly enriched were dismissed by the FTT, which noted that the DHSC’s funding was directly linked to the NHS and that VAT was included in the payments to DHSC.
- Potential Appeal: The decision has broader implications for other suppliers to the NHS under similar schemes, but HMRC is likely to appeal the ruling, as the VAT amount involved is significant and the arguments presented are based on points of law that can be revisited on appeal.
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