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14.01.13

Controversy over corporation tax exemption for private NHS providers

Independent providers to the NHS should be exempt from corporation tax, according to representations given to Monitor’s Fair Playing Field consultation, but the regulator denies it has come to a view yet on what its final review will recommend.

Public sector hospitals and providers do not have to pay corporation tax and can reclaim VAT on some non-exempt supplies and support services. Monitor’s discussion paper published with the consultation in November notes that because of this, “in some circumstances certain provider types are, as a result of their corporate form, subject to additional costs compared to other providers. This may in turn result in them finding the costs of expanding or entering a new market to be prohibitive.”

The Guardian has today reported that a source who has seen the final review says it is “sympathetic” to the tax arguments, but Monitor responded via Twitter: “The Guardian article on the Fair Playing Field Review is incorrect. We received representations on tax from contributors to Fair Playing Field Review but made it clear we have not yet come to a view.”

Jamie Reed, the shadow health minister, urged the Government not to let “tax avoiders into the NHS.”

He said: “They risk undermining trusted NHS services and could in time destroy the core public service ethos that sets our health service apart from others.”

David Worskett, of NHS Partners Network, said: “Corporation tax and VAT are significant economic distortions and it would be extremely helpful to have them addressed by the government.”

A report produced by former health secretary Andrew Lansley said that private sector providers face costs “about £14 higher for every £100 of cost relative to an NHS acute provider”.

A Department of Health spokesperson said: “We have always been clear that any income from private sources must benefit NHS services.

“We have commissioned Monitor to carry out their Fair Playing Field Review. Once it has been completed and submitted to the Department, we will consider how to respond.”

The report’s findings will be shown to health secretary Jeremy Hunt later this month, and he will respond by March 27.

Tell us what you think – have your say below, or email us directly at opinion@nationalhealthexecutive.com

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