Commons Sense

House of Commons · Adjournment Debate

Hospital Improvement Plans: VAT Rules

09 January 2020 · 2 other contributors

Opened by Karin Smyth Lab Bristol South

TaxationNHS

Summarised by AI from the official record, so it can contain mistakes.

Read the full transcript on Parliament.uk

At a glance

Karin Smyth raised concerns about hospital improvement plans: vat rules in the House of Commons. A government minister responded. Other MPs also contributed.

Key points

  • The Member of Parliament for Bristol South, Karin Smyth, raised concerns about VAT rules incentivising NHS trusts to act against government objectives.
  • Smyth argued that current VAT rules encourage trusts to set up wholly owned companies to avoid paying VAT on capital investments, thereby reducing ongoing costs.
  • The Minister for Health committed to reviewing the VAT rules within the NHS context but did not provide a specific timeline.

How the debate unfolded

MPs spoke in turn to share their views and ask questions. Here's what each person said.

Opened the debate

Karin Smyth Lab Bristol South

The Member of Parliament for Bristol South, Karin Smyth, raised concerns about how complicated VAT rules are creating incentives for NHS trusts to act against the Government's objectives. She argued that current VAT rules incentivise trusts to set up wholly owned companies and avoid paying VAT on capital investments in order to reduce ongoing costs. This undermines collaboration across the NHS system as outlined in the long-term plan. Smyth emphasised the importance of clarity on how these rules operate, and called for a policy paper exploring potential reforms to VAT refund rules for central government.

Other contributors (2)
  • Edward Argar Con Melton and Syston

    Argued that capital investment is an important issue and while he acknowledged the complexities, he encouraged contributions to the forthcoming call for evidence on VAT rules.

  • Liz Twist Lab Blaydon

    Asked whether the Government would commit to redressing disparities in terms and conditions between NHS staff employed through wholly owned subsidiaries versus those directly employed by trusts, highlighting that low-paid workers often lose out on pension contributions.

Government Response

Edward Argar

The Minister for Health committed to reviewing the VAT rules within the NHS context but did not provide a specific timeline. He noted that funding provided for capital schemes includes provision for VAT charged by suppliers, which will be determined on a case-by-case basis according to HMRC regulations and Treasury’s 'Contracting Out Direction'. The Government is considering longer-term plans to review section 41 VAT rules with the aim of either allowing full VAT reclaim or removing VAT reclaims entirely. The Minister invited contributions from the hon. Members to an upcoming call for evidence on this matter. He also offered to meet Karin Smyth and Liz Twist to discuss NHS policy further.

▸ Assessment & feedback
Summary accuracy