VAT implications of pharmaceutical rebates – Boehringer Ingelheim Ltd v HMRC

In a significant ruling, the First-tier Tribunal (FTT) has determined that payments made by Boehringer Ingelheim Ltd (BIL) to the Department of Health and Social Care (DHSC) under the UK’s voluntary pharmaceutical pricing schemes should reduce the consideration for the supplies of medicines to the NHS. Consequently, BIL is entitled to reclaim overpaid VAT amounting to £21.5 million. 

Between 2014 and 2020, BIL participated in two voluntary price control schemes:

• Pharmaceutical Price Regulation Scheme
• Voluntary Scheme for Branded Medicines Pricing and Access

Under these schemes, BIL made rebate payments to DHSC based on a percentage of its net sales to the NHS. These payments were made after the medicines had been supplied, leading BIL to make a claim for overpaid VAT.

This decision has broader implications for pharmaceutical companies supplying branded medicines to the NHS, particularly those participating in similar price control schemes. Key points include:

• Companies may be entitled to reclaim overpaid VAT if rebate payments reduce the consideration for supplies.
• Claims should be made as soon as possible to protect against the VAT four-year cap for such claims.
• Suppliers should review their participation in pricing schemes to understand any VAT implications following the judgment.

HMRC has been granted permission to appeal this decision to the Upper Tribunal. Businesses in similar situations should consider making claims for overpaid VAT and then have these stood behind the Boehringer appeal.

To speak to one of our VAT advisers please contact Nick Garside or Sean Turner.