Lawyers warn largest foundation trust it could face German tax bill

England’s largest foundation trust has been paid an average of £35m a year over the last five years for managing healthcare services to the British forces stationed in Germany.

The trust, which had a turnover of £1.1bn in 2011-12, has been providing healthcare services to the troops since 1996.

Earlier this year, senior management at Guy’s and St Thomas’ were advised by lawyers that its work in Germany could result in a bill for unpaid taxes.

A spokeswoman for the trust said: “We do not believe we have a tax liability in Germany. However, in January this year – for the first time – the trust received legal and tax advice suggesting that it would be prudent to ask the German tax authorities for binding advice on the tax position.” 

In a statement, Guy’s and St Thomas’ said: “Having taken further advice since January the trust has very strong grounds to believe that we do not have a tax liability in Germany – however, this is a matter for the German tax authorities to determine. 

“At all times, the trust has acted in accordance with its understanding of the legal and tax advice received.”

The trust’s annual accounts show Guy’s was paid a total of £173.6m by the Ministry of Defence for its work in Germany over the financial years 2006-07 to 2010-11. The total since 1996 is not known.

The news comes as the trust is bidding for an extension to the contract, which is due to expire in April 2013.

The MoD previously managed its own hospital services for the forces in Germany but Guy’s and St Thomas’ took over in 1996, and it won a further eight-year contract in April 2005.

The trust said each time the contract was renewed it “has taken advice on a range of issues, including tax”.

Since April 2008 the trust has also provided primary care services for personnel and their families, in partnership with charity the Soldiers, Sailors, Airmen and Families’ Association.

The trust’s board papers last month showed there had been a £298,000 “adverse variance” on the German contract “due to consultancy and legal fees”, which a trust spokeswoman said “reflects the cost of the rebidding process”.

In the risk register of the trust’s latest three-year plan, submitted to Monitor, it said it was “well placed” to win the contract again, because “other bidders would be likely to incur substantial costs to replicate the existing provision”. But it added: “The level of service required under these contracts is likely to reduce as troops are moved back to the UK.”