Outrage as Leeds NHS trust opts not to distribute £1.2m VAT refund for salary sacrifice vehicles back to staff

Leeds Teaching Hospitals NHS Trust received a refund of VAT of nearly £1.3 million in December 2020 following a legal case, and subsequent appeal, between Northumbria Healthcare NHS Trust and HMRC.

The legal case 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.

The details were brought to the Yorkshire Evening Post’s attention by a disgruntled employee who had paid into the scheme and who had acquired the figures through Freedom of Information (FOI) requests.

The trust has responded saying that it made the decision to invest the money in “patient services” because the contract stated it “bears the risk or benefit of any change to the lease car rate”. It admitted that communication with staff “could have been better”.

The employee said that questions started being asked by staff who had worked for numerous NHS trusts in the time between 2011 and 2020 and had received a refund from one but not Leeds Teaching Hospitals.

She said: “This refund was made up of VAT payments that employees, with salary sacrifice vehicles, had actually paid directly from their salaries.

“The trust has taken the decision not to pass this refund back to the employees from whom the deductions were taken, without any consultation with the affected employees.

"If they wanted the money to go to patient services they should have let employees have the option.

"I think it’s a very unjust decision. Especially as other trusts have said it’s the right thing to do to refund the money.”

She said that affected employees are only now being made aware of the issue “over two years after the fact and presumably only after increasing questions & enquiries”.

She said: “They haven’t been open and transparent. If this was considered the morally correct decision then why weren’t the employees advised at the time?

“While it has been acknowledged that there is no legal obligation for LTHT to refund this money to the employees concerned, what about the moral obligation?

“LTHT aspire to be the best place to work, while incorporating their Leeds Way Values, but based on them being the only trust in the region not to refund the money to their employees, this would seem to suggest otherwise.”

She said that other NHS trusts, including Leeds & York Partnership Foundation Trust, Bradford Teaching Hospitals, Yorkshire Ambulance Service, Leeds Community Healthcare, Mid Yorkshire, West Yorkshire ICB, Airedale, Calderdale & Huddersfield, Bradford District Care, have all made refunds back to the relevant employees, with some saying, “this is the right thing to do”.

She said: “NHS workers are being treated differently due to them working for different Trusts - you could have NHS workers, working alongside each other, having the same salary sacrifice vehicle, paying the same amount of money, over the same period of time, from the same lease car provider, but one receives a refund & one doesn’t, because one works for LTHT.

“Is this a fair way to treat NHS workers?”

The employee said she had received feedback from the trust saying that the decision was made after “considering various factors and seeking external advice to do the best thing for the trust, it’s staff and patients”.

She said: “I’m not sure that the staff involved would agree with this.

“People have had suicidal thoughts over the cost-of-living crisis in the past year, while LTHT are withholding money that could alleviate some of this pressure.

“It isn’t a case that asking for this money to be refunded will cause a cost pressure, because the Trust have already had this money refunded.”

She added that she doesn’t believe that many staff are actually aware of the refund and that there may be even more anger when the issue becomes more widely circulated.

She said: “Some people have just accepted the decision because they’re worried about bringing it up or think that the trust must have made the right decision.

"It should be funny when they say they are telling staff but only two years after when they should have told them. I think telling staff will just create more people to ask ‘how can this be right?’”

She added that she believes staff who have paid into the scheme could be owed “between just a few pounds and thousands of pounds”.

Simon Worthington, Director of Finance at Leeds Teaching Hospitals, said: "Our lease car contract enables employees to pay a fixed rate for their cars over the duration of the contract. This protects individuals from any financial changes.

"Under the contract, the Trust bears the risk or benefit of any change to the lease car rate. For example, when the VAT rate changed in 2011 the Trust bore that cost without passing this on to individuals. The decision taken in 2020 to honour the contract and invest the tax refund into patient services at the Trust was felt to be the fairest option.

"In light of staff questions and feedback, we reviewed this decision again recently and confirmed it. We have also reflected about lessons learned and recognise that communication with our staff could have been better. We will be writing to employees affected to inform them of our decision and the rationale for this."