Six home providers are lobbying the government to review the VAT status of the social care sector.
In an open letter to the Chancellor of the Exchequer, Rishi Sunak, the businesses argue that social care services should become zero-rated for VAT.
This would mean providers would not charge VAT on services to the most vulnerable in society, but reclaim VAT on their expenses, such as PPE, utilities, rent and repairs.
The letter was co-ordinated by Alex Green, franchising director at Radfield Home Care; Ken Deary, CEO of Right at Home UK; Martin Jones, CEO of Home Instead Senior Care UK (pictured); Michelle Fenwick, franchise director of Heritage Healthcare; Yvonne Tomlinson, CEO of KarePlus; and Wayne Smith, finance director and acting managing director at Bluebird Care.
Currently, goods and services provided by regulated social care organisations are exempt from VAT, meaning that they do not charge VAT on their services. However, their current VAT status means they cannot reclaim VAT on expenses.
“The COVID-19 pandemic is bringing an issue that has been facing care homes and the home care sector into sharp focus. That issue is the financial pressure the sector is operating under. A major contributor to this pressure is the punitive VAT regime we operate under,” the letter states.
On April 30, the government announced that PPE – one of the biggest and fastest growing expenses to care providers – will be free from VAT for a three-month period.
And while this move was welcomed by the sector, home care providers argue in the letter to the Chancellor that this “does not resolve the issue going forward”.
“Consider our position versus mobility aids retailers, which are usually serving the same client base – people over 65 and people with disabilities,” the letter continues.
“Mobility aids suppliers are zero rate for VAT, which means they sell their products or services, such as a stairlift installation, without charging VAT on most products or a maximum of 5% on a minority of products, yet they can reclaim all VAT on any input expenses incurred.
“The social care sector has long argued that it should also be zero rated as opposed to exempt for VAT purposes. This inconsistency has been particularly highlighted during the current pandemic.”
The group of home care providers claim that the cost to the Treasury to change social care to zero rated would be “relatively small annually”, but would make a “significant contribution” to keeping financially under pressure social care providers in business, both in the short and long term.
The letter concludes: “At a time when the frontline work on the social care sector is being applauded, literally, as we support some of the most vulnerable in our society, and the NHS, we would ask you to raise the issue of our sector being zero rated within your own network of contacts as we lobby to create a viable financial model for the sector.”