Our ever-evolving NHS workplace environments have adapted to putting in place temporary or modular units to accommodate growing patient needs.
The VAT treatment of modular or temporary units has been highlighted in litigation concerning ‘Sibcas’ and their supply of module buildings.
Both the First Tier and Upper Tier Tribunals supported HMRC’s contention that the modular units in this case were sufficiently immovable as to amount to a right over land and therefore exempt if there was no option to tax in place.
However, the recently released Court of Session decision supported Sibcas’ case that their supplies should be subject to VAT at the standard-rate. In a complex judgement, the Court of Session found that not only should the immovability of the units be taken into account, but also the contractual relationship between the parties. The Court decided that the contract reflected an on-going supply of services over a comparatively short period, rather than a passive rental agreement more typical of leases concerning the supply of land or buildings.
The result of the decision is that each supply of a modular unit would have to be viewed on its merits with regards to the degree of movability and in the context of the terms of the contract for the supply. In most cases, exempt treatment would be preferable for NHS Bodies, but suppliers will default to treating their supplies as taxable.
Notwithstanding the Court of Session decision, Liaison Financial can help NHS Bodies to check if they are being correctly charged VAT. This will be particularly relevant for hire arrangements spanning long periods or where the units are sold.