VAT has been temporarily scrapped on Personal Protective Equipment, in a move the Treasury estimates will save businesses, including home care providers, more than £100 million.
From today, PPE purchased by care providers, businesses and charities to protect against COVID-19 will be free from VAT for a three-month period.
The government hopes the move will ease the finances of care providers, who are often unable to reclaim the 20% VAT they incur on their purchases.
The news follows a call from Unison for the government to suspend VAT duties payable by providers for PPE.
UNISON general secretary Dave Prentis said: “No social care employer should be paying VAT for what has clearly become essential equipment.
“This is a national emergency. The virus is tearing through care homes and everything possible must be done to stop it. That means cutting the costs of PPE from today.
“Care workers are worried sick about the people they look after and also fear for their own health. Suspending VAT immediately for the duration of the crisis will make a huge difference.
“The government must also send a clear directive to suppliers and retailers not to hike the cost of life-saving safety equipment. No one should be trying to make a quick buck from people’s desperation to stay well during the pandemic.”
Home care providers have seen their revenue slashed by around 15%, according to UKHCA estimates, due to service users cancelling their care visits because they are fearful that their care workers don’t have adequate PPE.
The cost of PPE is also continuing to rise due to an increased requirement for use as COVID-19 has spread and guidance changed, variation in distribution and price gouging.
Welcoming the news, UKHCA policy director Colin Angel said: “UKHCA wrote to the Treasury in April asking for the VAT status of social care services to become zero-rated, because homecare providers are unable to reclaim the VAT they pay on goods and services they purchase for their business.
“Government has previously said that a change was not possible because of EU agreements on VAT. However, the EU recently indicated support for temporary VAT reliefs during the pandemic. Although the measure is only for three months, it has proved that Government is able to make emergency changes while the UK is still tied to EU-VAT rules. That tie will end once the Brexit transition period finishes.
“We will continue to campaign for a permanent change to the VAT status of social care (‘welfare services and goods’), as they are described by HMRC, from exempt to zero-rated, as this would make a significant difference to providers’ increasingly unsustainable costs.”