VAT exempt Medical Services

NHS Bodies urged to review VAT Treatment of NHS car park income following HMRC decision to appeal historic defeat.

by Berthold Bauer on May 28, 2024

In February 2024, The Court of Appeal ruled in favour of Northumbria NHS Foundation Trust on their position that NHS Trust managed car park charges should not be subject to VAT. This was in direct contrast to HMRCs long term stance that NHS car parking charges are subject to the standard rate of VAT. The Court of Appeal’s decision was two-fold;

  1. The Court of Appeal determined that Northumbria NHS Foundation Trust’s car parking arrangements fall under a ‘special legal regime’, as per Article 13(1) of the VAT Directive. This means the Trust’s car parking charges are outside the scope of VAT as these are closely linked to the Trust’s non-business activities.
  2. The Court of Appeal found no significant distortion of competition would be caused by the Trust not charging VAT on car parking. Hospital car parks have minimal surplus capacity, and HMRC failed to present sufficient evidence to show people would choose to park at a hospital car park, over other options, if no VAT was charged.

HMRC do not agree with the Court of Appeal’s decision, and are currently seeking permission to appeal the ruling. As such, it is unlikely that we will see any further instruction or updated guidance from HMRC anytime soon.


What do Trusts need to do now?

If your Trust operates its own car parking facilities, the Trust will need to make a decision on how to treat car parking related expenditure and income going forward.

  • Please note that if your car park is operated by a third party, such as a parking management company or a subsidiary, this ruling may not apply and you should take advice to understand how the decision impacts your Trust.

For Trusts operating their own car parking facilities, there are essentially two options to choose from:

  1. Continue to charge VAT on car parking charges. This means the Trust continues to recover VAT on car parking related expenditure as a business activity, but may need to make a provision in its accounts, this should the decision be upheld and VAT no longer be chargeable on car parking income and VAT on costs potentially no longer recoverable.


  1. Accept the Court of Appeal decision and stop charging VAT on car parking charges – this means the Trust cannot recover any input VAT on car parking related expenditure as a business activity. The other impacts this option brings may include revisiting the VAT position for previous financial years, unpicking Partial Exemption calculations and updating Capital Goods Scheme adjustments to name a few.
    • Please note that the COS rules will still apply to car parking related expenditure, as this ruling determines car parking to be a non-business activity.


Should you wish to discuss this further, or have any questions at all, please reach out to your usual VAT consultant, or alternatively you can email us at

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Berthold BauerNHS Bodies urged to review VAT Treatment of NHS car park income following HMRC decision to appeal historic defeat.

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