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VAT reform could save home care market £40m a year, says provider consortium

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The domiciliary care market stands to save £40 million per year, if a campaign to change the sector’s current VAT regime is successful, a consortium of home care providers has said.

The consortium is lobbying the government to allow all social care services, including home care, residential care and supported living, to become zero-rated for VAT, and is urging other providers to join the campaign.

Speaking during a webinar hosted by BBC presenter Ben Thompson, the group said the £40 million saving for the domiciliary care sector would equate to £20,000 a year for each individual care provider.

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The figure is based on an estimation of 6.5 million hours of care being delivered per week.

Caremark finance director Lisa Fyfe, one of the founding members of the consortium, said: “We anticipate that the VAT cost is around about 12p an hour for an established business, and we’ve looked at actual data from real established businesses to obtain that information.

“If you take a business operating about three to four thousand hours of care a week, we anticipate that the VAT cost is about £20,000 per year, so it’s quite a considerable amount of money.”

Other members of the group are 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; Michelle Fenwick, franchise director of Heritage Healthcare; Yvonne Tomlinson, CEO of KarePlus; and Wayne Smith, finance director and acting managing director at Bluebird Care.

If we can use the campaign as a mechanism to actually push more funding back into social care, it can be part of the government’s grand plan for how they can start to fix social care – Martin Jones.

They believe that the home care sector, which is mainly made up of small- to medium-sized independent operators, operates under a “punitive” VAT regime that sees margins squeezed.

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, such as PPE, utilities, rent and repairs.

Reinvestment

The consortium argues that if care services were zero-rated for VAT, the savings could be reinvested back into the workforce, resources and client experience.

Radfield Home Care franchising director, Alex Green said: “A reduction in the charges would certainly enable greater investments in technology and that could ultimately drive through cost savings nationally for the NHS and, potentially, provide better services for all of our clients.

“At the moment, the investment is probably beyond the reach of many social care providers and yet, at the same time, the regulator is moving towards incorporating use of technology as part of their ratings to get ‘Outstanding’ ratings going forward.”

“If the saving for the whole of the social care sector is £100 million then, let’s be honest, that’s a drop in the ocean for the government, but the impact on individual providers will be huge – Ken Deary.

One area KarePlus would like to reinvest the savings into is recruitment, training and retention, explained Yvonne Tomlinson.

“Recruitment does cost money and it takes up a lot of time – sifting through applications, the interviewing and we’ve all got dropout rates,” she said during the webinar.

“Advertising on social media job pages – they’re all subject to price increases – this has an effect on what we can and can’t do. These are what I see as unseen costs and, as providers, we’d all love to be able to invest in campaigns that proactively reinforce the image of care.

“We’d also love to be able to put money back into things like continuing professional development. We’re constantly waiting for funding to be available so that we can offer this to individuals.”

Asked whether calling on the government to forfeit £40 million a year for the home care sector is a realistic proposal, Right at Home UK CEO Ken Deary said the money is a trivial amount for the chancellor, Rishi Sunak, compared to the “billions of pounds” in furlough costs.

“If the saving for the whole of the social care sector is £100 million then, let’s be honest, that’s a drop in the ocean for the government, but the impact on individual providers will be huge. £20,000 to an individual provider to provide extra training, extra pay for staff, is huge,” he said.

“By taking action now on VAT, the government can finally recognise the vital role we all play on the front line and support us to future proof the home care sector for years to come.”

Window of opportunity

Home Instead CEO Martin Jones, who conceived the idea for the campaign along with Deary, said that given the greater public appreciation for social care during the COVID-19 crisis; the collective call from MPs, committees and think tanks for the government to reform the system; and the fact that the UK is about to cut ties with EU-VAT rules, the social care sector has a “once in a lifetime opportunity” to change its VAT regime.

“We’ve got a window of opportunity here and we need to seize it,” he said.

“We’ve been applauding our carers around the country every Thursday and it’s really shone a light in terms of the general public the awareness of what home care, and the wider social care market, can play to support people in the community, and that’s never been done before.

“Camilla Cavendish has been brought back in help the present Prime Minister to help push social care agenda going forward. So if we can use this campaign – and I know UKHCA are talking to Camilla, as is Care England –  as a mechanism to actually push more funding back into social care, it can be part of the government’s grand plan for how they can start to fix social care.

“It’s right that we are the poor relation of the NHS, so £40 million in the context of the billions that’s invested in the NHS is very, very little, but can make a huge difference in the support we could give the communities that we serve.

“So that’s why, as a body of people, we got together. That’s why, as a wider body of people, we can get together and create a movement on this zero-rated VAT and really start to push it forward and influence the people in government to make that change.”

To join the campaign, please email team@calvinm.co.uk.

Tags : VATzero-rated
Sarah Clarke

The author Sarah Clarke

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