Jurisdiction(s):
United Kingdom

UKUT clarifies VAT price reductions: direct link to supply and final consumer required; payments on direct supplies to DHSC qualify; wider scheme payments outside the supply chain do not

Published on: 01 April 2026

Published by a LexisNexis Tax expert

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Article summary

HMRC v Boehringer Ingelheim Limited [2026] UKUT 135 (TCC)

Boehringer Ingelheim Ltd (BIL) supplied pharmaceutical products at the standard rate to the Department of Health and Social Care (DHSC), retail pharmacies and, predominantly, wholesale distributors. Most of those supplies were to wholesalers and were in the main ultimately used by the NHS. In line with government arrangements concerning medicines used by the NHS, BIL made payments to the DHSC. BIL maintained that each and every payment effectively reduced the consideration it obtained and therefore amounted to a rebate for VAT purposes. HMRC, however, contended that none of the payments constituted a VAT rebate for VAT purposes. The UT disagreed with both BIL and HMRC. HMRC’s principal contention was that BIL’s payments to the DHSC were not price reductions but charges on overall revenues, akin to a profit‑regulatory mechanism, meaning there was no reduction in price for VAT purposes and thus no rebate. HMRC further characterised the DHSC’s role as that of providing funding...

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