Leeds Teaching Hospitals NHS trust reverses ‘unjust decision’ over £1.2m VAT refund for staff vehicles

Leeds Teaching Hospitals NHS Trust (LTHT) has agreed to offer refunds for VAT payments made on salary sacrifice vehicles between 2011 and 2020 and apologised “for any upset” caused.

The trust received a VAT refund of nearly £1.3 million in December 2020 following a legal case that established that there is no requirement for the payment of VAT on salary sacrifice vehicles; a scheme run by the NHS in which employees are able to pay for cars from a leasing company directly from their salary at a lesser rate through an agreed contract.

The trust received a refund of VAT from 2011 to 2020, totalling £1,298,824.71, of which £112,941.28 was paid as an admin fee to the leasing company, NHS Fleet Solutions.

While most other trusts in the area offered refunds to staff who paid into the contracts, LTHT opted not to. It said that this was because the contract ensured that the trust carried “the risk or benefit of any change to the lease car rate”.

An impacted employee of the trust complained that the “unjust decision” was taken without consultation with affected staff. She added that the trust did not seek to inform staff that it had received the refund.

She said that the trust circulated a letter about the refund following the publication of an article in the Yorkshire Evening Post and that it has now reversed its decision and agreed to offer the VAT payments to eligible staff.

Jonathan Gamble, Deputy Director of Finance at Leeds Teaching Hospitals NHS Trust, said: "Under the terms of the lease car contract, we are not required to make the VAT repayment. However, we recognise that we could have better handled the communications with our staff around this decision and we also recognise that most trusts in our region have passed this payment onto their colleagues. As such, we have agreed to make the VAT payment available to staff if they choose to take it.

“We would like to apologise for any upset this has caused and to reassure our colleagues that our intention throughout this has been to behave in the spirit of the contract and apply it consistently and fairly.”