Drugs: VAT

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. Whether VAT applies to medicines or treatments provided for free depends on the precise facts of each case.

The Government is aware of the issue you raise in the context of free-of-charge medicines and, recognising the importance of patients across the UK having access to innovative medicines, I want to see this issue resolved quickly. The Government is in discussions with relevant stakeholders including the life sciences sector on this matter.

Given these ongoing discussions, I understand that HMRC will use its discretion to extend certain deadlines and suspend collection of tax if a taxpayer has requested a statutory review. This does not mean that HMRC has changed its view of past tax liabilities. Individual taxpayers should speak directly to HMRC on their specific circumstances.

HMT does not hold information on VAT revenue from free-of-charge medicines. Businesses are not required to provide a breakdown by product or service on their VAT returns as this would impose an excessive administrative burden.