BUPA Hospitals Ltd entered into a prepayment VAT-avoidance scheme prior to a change in the VAT legislation, to move certain drugs from zero-rated to exempt status. The amount of money paid to a captive company for the supply of drugs to an associated company would have lasted for almost 200 years before it was exhausted. Additionally, the drug-selling company was not actually permitted to sell the drugs it was contracted to supply, because it did not have the necessary licence. It was admitted that the scheme was entirely designed for VAT-avoidance purposes and the case was dismissed.
