Drugs: VAT
The question
To ask the Chancellor of the Exchequer, whether her Department has directed HMRC to review the application of VAT upon medicines supplied free-of-charge via EAMS and other compassionate access schemes.
Answered by Dan Tomlinson
VAT is the UK’s second largest tax, forecast to raise £180 billion in 2025/26. Taxation is a vital source of revenue which helps to fund public services.
The Early Access to Medicines Scheme (EAMS) allows patients access to free medicines for life threatening conditions before receiving full NHS approval.
Under UK VAT law, some transactions where no money changes hands are treated as if a supply has been made – these are called deemed supplies. This is to keep the system fair. If a business has reclaimed VAT on costs (like making or importing goods), it should not avoid accounting VAT when those goods leave the business for free.
Whether VAT applies to medicines or treatments provided for free under the EAMS will depend on the precise facts of the case. In certain circumstances the giving of goods away for free can be outside the scope of VAT. Where the supply is within the scope of VAT a relief may apply, meaning the supply can be made VAT free.
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