In the recent case of Isle of Wight NHS Trust v HMRC [2025] TC09640, the first-tier tribunal ruled in favour of the NHS trust, finding that the supply of locum medical practitioners was exempt from VAT. This is a significant judgement, as the case has been designated a lead case for a number of similar appeals brought by other NHS trusts.

Background

The dispute arose after HMRC determined that the supply of locums by staffing agencies to the trust was a VATable supply. The trust appealed, arguing that such supplies were exempt under Item 5, Group 7, Schedule 9 of the Value Added Tax Act 1994, which exempts ‘the provision of a deputy for a person registered in the register of medical practitioners’.

HMRC disagreed, contending that the exemption applied narrowly to GP deputising services. In support of its position, HMRC relied on a newly uncovered historic policy file – referred to during the case as the ‘forbidden documents’, which outlined internal interpretations of the VAT legislation. These documents were not part of any public or parliamentary record.

Tribunal’s analysis

The tribunal rejected HMRC’s narrow interpretation of Item 5. It held that, applying the ordinary meaning of the provision, the exemption covers the supply of a person acting as a deputy for a registered medical practitioner, regardless of their specialism. The tribunal also noted that if parliament had intended to limit the exemption solely to GPs, it would have used clearer language.

In this case, the trust had been supplied with two registered consultants to temporarily fill roles that would otherwise have been occupied by other registered practitioners. The tribunal therefore found that this fell squarely within the scope of Item 5.

Further, the tribunal accepted that there was sufficient evidence, such as contracts, timesheets and an audit trail, to confirm that the services had been requested and received by the trust directly.

Regarding the use of the ‘forbidden’ policy documents, the tribunal ruled that HMRC could not rely on unpublished internal documents to interpret legislation. Only publicly available parliamentary materials can be used to aid statutory interpretation.

Conclusion

The tribunal upheld the appeal and found that VAT had been incorrectly charged on the supply of the two consultants.

The contracts with the supplying agencies (MVA and RMSL) provided for the temporary supply of doctors and placed the doctors under the control and direction of the trust. This constituted a supply of staff to the trust.

There was a sufficient audit trail – including contracts, timesheets and invoices – showing that the trust requested, received and paid for these services.

This judgement provides important clarification on the scope of the VAT exemption for medical deputies and sets a precedent for other NHS trusts challenging similar HMRC decisions.

This case highlights the need to take specialist advice in complex tax cases in challenging HMRC in the course of enquiries or determinations issued, as HMRC may not always be relying on publicly available guidance.

As always, practitioners undertaking any tax work on behalf of clients should always have regard to the rules in the Professional Conduct in Relation to Taxation, which has been recently updated to take effect from 1 January 2026.