order for reference, those arrangements, if successful, would enable the BUPA Group to avoid a loss of cashflow and to avoid paying the Commissioners any VAT under them. The BUPA VAT group was able, in its VAT return for the period ending in November 1997, to account for input VAT of GBP 17.5 million in respect of purchases by BUPA Hospitals from BUPA Medical, matched by output VAT of GBP 17.5 million in respect of sales by BUPA Gatwick Park to Goldsborough Developments. The Goldsborough Group, which was separate from the BUPA VAT group, could do likewise: its VAT return included input VAT of GBP 17.5 million in respect of Goldsborough Developments, purchases from BUPA Gatwick Park and output VAT of GBP 17.5 million in respect of BUPA Medical sales to BUPA Hospitals.
29 On 8 September 1997, Midland Bank was instructed to transfer from the account of another company in the BUPA group, BUPA Investments Ltd ('BIL'), a total sum of GBP 235.5 million, and to credit GBP 118 million and GBP 117.5 million to the accounts of BUPA Hospitals and Goldsborough Developments respectively. Monthly interest was charged at the average overnight base rate for each month.
30 The same day, Midland Bank was instructed to transfer GBP 117.5 million, first from BUPA Hospitals to BUPA Medical, thereafter from Goldsborough Developments to BUPA Gatwick Park, and then back once more to BIL. BUPA Medical and BUPA Gatwick Park were credited with interest on the amounts of their deposits with BIL.
31 On 18 November 1997, the VAT (Drugs, Medicines and Aids for the Handicapped) Order (SI 1997/2744) was laid before Parliament. It took effect from 1 January 1998. It amended Group 12 of Schedule 8 to the VAT Act 1994 by removing supplies by private health providers in the United Kingdom from the zero-rating schedule. They became exempt supplies. As a result, in principle input VAT on such products can no longer be deducted.
32 Arrangements to implement the terms of the prepayment agreements between BUPA Hospitals and BUPA Medical were put into effect in September 1998. The order for reference states that the wholesale dealer's licence for medicinal products was granted to BUPA Medical on 19 August 1998 and that all hospitals managed by BUPA Hospitals were ordering from BUPA Medical towards the beginning of December 1998. According to the order for reference, BUPA Hospitals is using its prepayments at a rate which will result in zero-rating being preserved for six to seven years after September 1998.
33 In the case of the prepayment agreements between Goldsborough Developments and BUPA Gatwick Park, the arrangements relating to the supplies of prostheses took effect in mid-2001, and those relating to the supplies of drugs took effect in November 2001. The order for reference states that serious problems appear to have arisen after the purchase of the Goldsborough group, which needed to be resolved before the ordering process could be implemented. For that reason, BUPA Gatwick Park did not obtain a