NHS trusts all over the country will be deeply disappointed by a test case ruling that pay-and-display hospital car parking is not exempt from VAT. The First-tier Tribunal (FTT) found that charging patients, visitors and staff to park their cars is an economic activity carried on for the basic purpose of generating income.
Northumbrian Healthcare NHS Foundation Trust operates 14 hospitals and serves a population of about 500,000. It appealed to the FTT after HM Revenue and Customs (HMRC) refused its application for a £267,443 rebate in respect of VAT charged on hospital car parking over a three-year period. Waiting in the wings were a large number of similar appeals by other NHS bodies.
Ruling on the matter, the FTT acknowledged that, in order to maintain accessibility to hospitals for all, the trust is obliged to provide parking facilities at a reasonable price. Disabled people, cancer patients and certain others are entitled to free or concessionary parking and not all of the trust’s car parks operate at a profit. Around 80 per cent of people attending its main hospitals do so by car.
Dismissing the appeal, however, the FTT noted that it was clear from Department of Health guidance that hospital car parking is regarded as an income-generating activity which must be profitable in order to improve health services. In supplying car parking for consideration, for the purpose of obtaining additional income on a continuing basis, the trust was engaged in an economic activity.
Despite its public status, the trust was a taxable person within the meaning of VAT legislation. It did not provide car parking under any special legal regime and entered into private contractual arrangements with those who wished to park their cars on its land. Exempting the trust’s car parks from VAT would significantly distort competition in that it would enable the trust to undercut commercial car park operators.
The provision of car parking was not so closely connected or essential to the provision of hospital and medical care as to merit exemption from VAT. Although car parking facilities could be said to improve the comfort and wellbeing of patients, that was not enough. Car parking was neither an indispensable stage nor an integral part of the diagnosis, treatment or care of patients.