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Hospital parking charges could fall after taxman loses landmark VAT case

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Hospital parking charges could be cut after the taxman lost a VAT legal battle against an NHS trust in a potentially landmark ruling.

HM Revenues and Customs (HMRC) has been ordered to pay £267,443 in wrongly claimed value added tax back to Northumbria Healthcare NHS Foundation Trust following a ruling in the Court of Appeal.

The decision could have wide-ranging ramifications with 50 similar appeals by NHS bodies set to follow, worth approximately £70 million, the Telegraph understands.

Exorbitant parking fees at hospitals have been a frustration of patients, their visitors and NHS staff alike.

Hospitals made £146m from patient and visitor parking in 2022-23, up by 50pc on the year before, the equivalent of £400,000 per day.

Meanwhile, staff in England spent a total of £46.7m on parking at hospitals where they worked, which was up eight-fold on the year before.

NHS workers had been temporarily allowed to park at hospitals for free during the pandemic but are now back paying fees that are, in line with NHS guidelines, “reasonable for the area”.

In some cases fees have reached as high as £3 an hour.

Staff in Scotland and Wales are able to park for free.

The court declared that NHS bodies operating under a “special legal regime” should not be subject to VAT because they are providing medical care, overturning two previous tribunal rulings.

It means the HMRC will have to pay back more than a quarter of a million pounds in VAT for the three years ending in March 2016, and tens of millions could follow.

However, the tax authority is allowed to appeal the decision to the Supreme Court, which experts have warned is likely.

Geraint Lewis, a VAT director at audit firm Moore Kingston Smith said it was likely “a number of other NHS Trusts with a very similar fact pattern” could stand to benefit.

He said there was “clearly an opportunity for the NHS to reduce parking fees by the amount of VAT at no loss to themselves, [but] whether they choose to do that is a commercial, or political matter”.

“Parking fees in hospitals is a high profile issue, and one that is not particularly popular with patients and their families. So I can imagine there would be quite a lot of public clamour to see this passed over as a saving,” Mr Lewis said.

As the ruling has been made for one single trust, HMRC could seek to battle each case separately, in addition to an appeal, which would delay refunding hospitals the VAT charges imposed.

The Department of Health could enact a “no win, no lose situation”, Mr Lewis added, where the Government keeps the money by other means such as reducing its funding.

Any NHS Trusts that have outsourced their parking to third parties will not be able to claim back the VAT under the exemption, it is understood.The tax office is in talks with various NHS bodies while it considers the effects of the ruling.

An HMRC spokesman said: “The tax rules apply to everyone and we discharge our responsibility across all sectors fairly and evenly. In this case, we are considering the judgement and our next steps.”

Northumbria Healthcare NHS Foundation Trust was asked for comment.