- Case Overview: Boehringer Ingelheim Ltd (BIL) challenged HMRC’s rejection of a £21m VAT refund claim, arguing that payments made to the Department of Health and Social Care (DHSC) under voluntary price control schemes should reduce the taxable amount of their supplies.
- HMRC’s Rejection Reasons: HMRC rejected the claim based on three points: the DHSC was not the final consumer, insufficient link between payments and the supply, and reducing the taxable amount would distort fiscal neutrality.
- FTT’s Decision: The First-tier Tribunal (FTT) ruled that the payments to the DHSC did reduce BIL’s taxable supplies and that unjust enrichment did not apply, thus allowing BIL’s appeal.
- Legal Focus: The FTT based its decision on EU Directive articles and past European Court of Justice (ECJ) rulings, emphasizing that the DHSC can be considered the final consumer and that the payments constituted a price reduction.
- Impact on VAT and Fiscal Neutrality: The FTT concluded that preventing BIL from reducing its taxable amount would violate the principle of fiscal neutrality, as it would require BIL to account for VAT on more than it received, despite subsequent zero-rated supplies by others in the supply chain.
Source KPMG
