VAT Penalties Blog


Charities lose out in healthcare VAT

Under current VAT Regulations, NHS Trusts are able to recover most of the VAT which they incur on prescribed services which they procure in the fulfilment of their statutory obligations regarding the provision of healthcare. This is because the provision of healthcare by an NHS Trust or equivalent body is largely outside the scope of VAT, and under the “Contracted Out Services “ rules such bodies are exceptionally allowed to recover VAT on designated services which relate to this provision.

However, if a Trust contracts the service out to a charity, for example, then the charity does not benefit from the same concession, and any VAT the charity incurs on the costs of providing the service remains irrecoverable. Hospices are commonly caught by this anomaly and it has led to a “two tier” system of healthcare.

The Secretary of State has agreed to review the VAT position with a view to providing an equitable solution for charities who provide healthcare services.

For any questions regarding charities, healthcare and VAT contact our VAT experts for a free initial consultation.

VAT-Penalties Team


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