Major VAT Refund Opportunity for the Pharmaceutical Sector
Glyn Edwards · Posted on: February 19th 2026 · read
This insight was co written by Glyn Edwards and John Rossiter.
The Upper Tax Tribunal is currently considering HMRC’s appeal against a successful case launched by Boehringer Ingelheim which was initially decided in the taxpayer’s favour by the First-tier Tribunal.
BIL supply branded pharmaceutical products to the NHS either directly or indirectly through wholesale distributors. The majority of BIL's supplies were to wholesale distributors in the UK and were liable to VAT at 20%. Prices of health service medicines supplied to the NHS were controlled by operation of voluntary and statutory schemes.
BIL participated in two voluntary price control schemes and made payments to the Department of Health and Social Care ('DHSC'). Payments were calculated by multiplying the relevant percentage under the relevant scheme by the sales within the scope of the scheme (i.e. the net sales of BIL’s branded medicines).
BIL’s view was that the amounts paid to the DHSC should have been treated as reducing the price of its supplies of health service medicines to the NHS and thus the VAT due. The company therefore made a claim for repayment of overpaid output tax which was rejected by HMRC. The First-tier Tribunal agreed with BIL that the payments under the Schemes reduced the taxable amount and that BIL were therefore entitled to a VAT refund.
Our view is that BIL are likely to succeed in the Upper Tax Tribunal too. Boehringer’s sister business in Germany ran a similar successful argument to the Court of Justice of the EU so HMRC will have a high hurdle to overcome to demonstrate sufficient reason for the Upper Tribunal to depart from that precedent.
The judgement of the Upper Tribunal is likely to come in the next 3 or 4 months. In the meantime, pharmaceutical businesses who have made payments to the DHSC should review their position urgently.
Businesses that have not made VAT adjustments should consider submitting refund claims to HMRC now – there is a 4-year claim time limit that applies so any delay may reduce the potential claim available due to amounts falling out of time. We can assist with the preparation and submission of claims and dealing with HMRC’s response to them.
Businesses that have adjusted their VAT in respect of payments to the DHSC should keep a watching brief of the Boehringer litigation. If the Upper Tax Tribunal do find in favour of HMRC, action may need to be taken to mitigate any potential exposure. We can provide advice on the best course of action should the case go in favour of HMRC.
