Boehringer Ingelheim Limited, a pharmaceutical supplier to the NHS, was held to be entitled to a significant repayment of overpaid VAT as a result of payments that it made to the Department of Health and Social Care (DHSC) under various price control schemes. This is a significant judgment for pharmaceutical suppliers which make payments under these schemes.
Background
Boehringer supplied medicines to the NHS both directly and through wholesalers. Those supplies were chargeable to VAT at the standard rate. Boehringer subsequently made payments to the DHSC under two price reduction schemes (the Pharmaceutical Price Regulation Scheme and the Voluntary Scheme for Branded Medicines and Access). Those payments were calculated by reference to the amount that the annual growth of Boehringer’s net sales income exceeded a prescribed percentage.
Tribunal’s findings
The First Tier Tribunal found that, for VAT purposes, those scheme payments reduced the price received by Boehringer for the supplies of medicine and, correspondingly, reduced Boehringer’s VAT liability. Boehringer was therefore entitled to a repayment of the overpaid amount of VAT.
HMRC have been granted permission to appeal to the Upper Tribunal.
Comment
There may be significant upside for any pharmaceutical companies in a similar position to Boehringer if they were to consider making repayment claims to HMRC. A taxpayer can submit an error correction notice claiming repayments of VAT going back four years. Boehringer claimed £21.5 million over a six year period (it submitted a number of claims between 2018-2020).
HMRC’s appeal is due to be heard by the Upper Tribunal in February 2026. However, pharmaceutical companies could still make repayment claims now in order to protect their position for the past four years. Assuming that HMRC ultimately loses on appeal, which we think seems likely, HMRC would then give effect to those claims and refund the overpaid VAT.
The Kennedys team are experienced in making VAT repayment claims, particularly in the context of changes to the law or HMRC’s position. If you would like to have an independent review of your VAT position in relation to payments under these schemes, please get in touch with one of the team.