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HMRC internal manual

VAT Health

Tensions between UK and EU law: “In” versus “by”

The drafting of the principal VAT Directive and Item 4 of Group 7 to Schedule 9 of UK VAT law differ, and this creates a tension between the two.

At VATHLT3040 we explained that we do not allow exemption simply on the basis that the supply geographically takes place within a hospital’s premises, but that we do allow exemption, in limited circumstances, where the supply is not actually made by the hospital. Whilst the first leg of this policy is fully in line with the principal VAT Directive, it could be argued that the second is not, because these supplies, whilst meeting the Item 4 definition of being made “in” institutions, fall short of EU law which only exempts supplies made “by” institutions.

However, we do not consider that “in” in UK law should be read as “by” and although we do not permit exemption to all supplies made in an institution (as described at VATHLT3040), we apply the criteria used in the two Tribunals detailed in that paragraph to determine which supplies can be exempt under item 4.