Third Sector and Public Sector potential VAT opportunity

Tony Cochrane

Tony Cochrane

VAT Senior Manager

Third Sector and public sector organisations may benefit following the ruling in the Wellcome Trust Limited (“WTL”) VAT First Tier Tribunal case. Such organisations should read on if they procure services from overseas suppliers to facilitate non-business activities, as there may be a financial and administrative benefit.


WTL’s predominant activity is issuing grants for medical research, which is a non-business activity for UK VAT purposes. The grants are funded by investment income, mostly derived from overseas investments.

Despite undertaking mostly non-business activities, WTL is registered for UK VAT as it has some taxable activities, such as property rental and catering.

WTL undertook the reverse charge to account for VAT on non-EU investment management fees. The reverse charge involves the customer accounting for VAT as a sale and purchase. WTL cannot recover VAT as the purchases are attributable to their non-business activity. As such WTL suffers a VAT cost when it undertakes the reverse charge.


The point of the case was to establish whether the place of supply of the investment management services WTL receives is the UK. Subject to further litigation:

  • If yes, WTL would continue to use the reverse charge and suffer a VAT cost when it purchased investment management services from overseas, and its VAT claims would be unsuccessful.
  • If not, WTL would no longer use the reverse charge and would not have to pay VAT when it purchased investment management services from overseas. HMRC would pay the outstanding VAT claims, totalling more than £13m.


The contents of the European VAT legislation were at the heart of the matter. This legislation says that a taxable person who also carries out non-taxable activities is considered a taxable person in respect of all the services they receive.

However, the legislation goes on to say that the place of supply of services to a taxable person ‘acting as such’ is where that person has established their business. WTL felt the inclusion of ‘acting as such’ results in it not having to use the reverse charge.


The Tribunal considered various points, but ultimately agreed with WTL.

Therefore, subject to further litigation, WTL will no longer use the reverse charge and pay VAT to HMRC on the services, and it will receive its retrospective VAT claims.  

Impact on your organisation

If your organisation uses the reverse charge for services purchased from overseas you may want to consider submitting a VAT claim to HMRC. If HMRC decides to escalate the WTL case to a higher court it will reject claims. However, submitting VAT claims now will protect your position until the matter is concluded. Otherwise you could lose out due to the four year time bar for VAT claims.

There may also be an opportunity to deregister from VAT if your organisation is registered because of the reverse charge.

Get in touch

Please contact me Tony Cochrane: or another member of the Johnston Carmichael VAT team to discuss the next steps if you think you may benefit from the WTL ruling.