JIGSAW MEDICAL SERVICES LIMITED v HMRC [2017] UKFTT 0537 (TC)

The First-Tier Tax Tribunal has ruled a supply of ambulance services was zero-rated, entitling the taxpayer to recover VAT input tax on converted vehicles acquired for use as ambulances.

Jigsaw Medical Services Ltd carried on the business of supplying ambulance services. It agreed with the NHS to provide emergency and non-emergency transportation of patients, and purchased specially adapted vehicles for this purpose. The adaptations included permanent features for the lawful carriage of persons in wheelchairs.
 
Jigsaw made VAT input tax refund claims of £32,792.59 and £100,954.64 in its October 2015 and January 2016 VAT returns. It also advised HMRC it had taken on a large contract with the NHS to provide ambulance services. The large refund claims prompted HMRC to visit the taxpayer.
 
HMRC concluded Jigsaw was making exempt supplies of transport services for sick or injured persons in vehicles specially designed for that purpose. This meant Jigsaw was not entitled to reclaim VAT input tax on the purchase of vehicles used to make these supplies.
 
Jigsaw submitted it was making zero-rated supplies of transport services in vehicles designed, or substantially and permanently adapted, for the safe carriage of a person in a wheelchair or two or more such persons, and … if it were not so designed or adapted, would be capable of carrying no less than 10 persons. Accordingly, Jigsaw said it was entitled to reclaim VAT input tax on the purchase of vehicles used to make these supplies.
 
Following a review by HMRC upholding its initial decision, Jigsaw appealed to the First-Tier Tax Tribunal.
 
The only issue before the Tribunal was whether the specially adapted vehicles acquired by the taxpayer were capable of carrying at least 10 persons. If they were, then Jigsaw’s supplies of ambulance services were zero-rated.
 
The Tribunal decided the evidence supported Jigsaw’s submission that the vehicles were capable of carrying 10 or more persons, noting that a mini-bus version of the vehicles was routinely used to carry 10 or more persons for other users. It rejected the HMRC’s more restrictive approach, concluding that Jigsaw’s supplies were zero-rated.
 
VAT registered businesses and charities currently treating supplies of transport services for persons in wheelchairs as VAT exempt should consider whether this decision allows their supplies to be zero-rated, allowing recovery of VAT input tax incurred on vehicles used to make these supplies. Claims for VAT input tax can be made at any time up to four years after the date of an invoice, so action should be taken as soon as possible if a refund of VAT is due. A protective claim can be lodged with HMRC to allow further time to calculate the amount of a VAT refund.