When dealing with high value personal injury litigation, paying parties tend not to lose much sleep over the issue of whether VAT should be paid on the full amount of medical records fees, where the medical records are obtained through a medical reporting organisation (“MRO”), or whether VAT should only apply to the MRO’s administration fee.
On the other hand, for volume, lower value claims, the impact of this small amount per case can be significant when insurers are dealing with 10,000s or 100,000s of claims.
In Matthew Hoe’s excellent “A Practical Guide to Costs in Personal Injury Cases”, published as far back as April 2016, he writes:
“VAT on medical report fees is a doggedly contentious issue that has been producing notable judgments for a decade. Although very small sums are involved in each case, it arises in so many claims that paying parties take the point. The basic propositions are generally accepted and the disputes centre on the practices of medical agencies.
…
The correct VAT treatment of medical fees by medical agencies is an issue in desperate need of a decision by the senior courts to settle the point once and for all.”
As if by magic, three years later we have such a decision.
In British Airways Plc v Prosser [2019] EWCA Civ 547 the Court of Appeal held:
- It would normally be appropriate for MRO’s, in circumstances where they were doing more than simply acting as a post-box and where the report/records are being requested by the solicitors to enable them to perform their service to the client (rather than the solicitors acting just as the client’s agent), for VAT to be charged by the MRO on the total cost.
- In the context of a low value claims, where the amount of any VAT is not substantial, payment of VAT on the full amount was a cost that was “reasonably and proportionately incurred” and “reasonable and proportionate in amount”, so as to satisfy the requirements of CPR 44.3 regardless of whether the MRO was actually obliged to charge VAT as it did.
