Boehringer Ingelheim Ltd – Upper Tribunal Rules Against Taxpayer on Price Control Payments Reducing VATable Consideration

• The Upper Tribunal (UT) largely ruled against Boehringer Ingelheim Ltd (BIL), finding that payments made to the Department of Health and Social Care (DHSC) under voluntary price control schemes generally did not reduce the taxable amount of BIL’s pharmaceutical supplies for VAT purposes. This decision will impact numerous similar claims from other pharmaceutical manufacturers.
• The UT rejected the FTT’s earlier conclusion that DHSC was the “economic final consumer” in most scenarios. It clarified that a “final consumer” must be identified by a relationship of reciprocal performance for goods, even if physically supplied to a third party, and that merely “bearing the cost” of a supply is insufficient to establish this.
• The UT held that BIL could only adjust its output tax for payments related to a limited category of supplies: those made directly to and paid for by the DHSC (e.g., vaccines for national programs), where the DHSC was deemed the final consumer. In all other scenarios (supplies to NHS healthcare providers, pharmacies, or via wholesalers), no direct link to final consumption by the DHSC was found, and thus, the payments did not constitute a price reduction for VAT purposes.

Source KPMG

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Upper Tribunal: VAT Not Reduced on Pharma Payments by Boehringer Ingelheim to DHSC

• Boehringer Ingelheim Limited (BIL) made payments to the Department of Health and Social Care (DHSC) under schemes to control NHS spending on branded medicines.
• BIL claimed these payments should reduce the VAT consideration for their pharmaceutical supplies, but HMRC rejected this.
• The First-tier Tribunal initially sided with BIL, but the Upper Tribunal overturned this decision.
• The Upper Tribunal ruled that the payments were not linked closely enough to the supply chain to reduce VAT consideration, as DHSC was not part of the supply chain.
• HMRC’s appeal was allowed, except for a few payments related to medicines supplied directly to DHSC.

Source: taxscape.deloitte.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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