Community Interest Companies: VAT
The question
To ask the Chancellor of the Exchequer, what assessment she has made with Cabinet colleagues of the potential impact of charging VAT on Community Interest Companies (CICs) carrying out health support services on the ability of (a) employees of CICs to feasibly continue their work into the future and (b) families who rely on the services of CICs for the care of their loved ones to continue to afford such services.
Answered by Dan Tomlinson
Supplies of welfare services, including the provision of care for people with permanent disabilities and dementia, are exempt from VAT if they are supplied by eligible bodies, such as public bodies or charities.
Because community interest companies (CICs) are not charities in law, they must meet the criteria of being state-regulated in order to provide VAT-exempt care services. This is to ensure that the VAT relief is carefully targeted at private providers offering safe and high-quality welfare services.
The Government recognises that there are private organisations that bring value to the care sector without being regulated, but extending the VAT relief to include these would have to be carefully balanced against the risks that it poses.
More generally, VAT is a broad-based tax on consumption, and the 20 per cent standard rate applies to most goods and services. VAT is the UK’s second largest tax, forecast to raise £180 billion in 2025/26. Exceptions to the standard rate have always been limited and balanced against affordability considerations.
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