Drugs: VAT
The question
To ask the Chancellor of the Exchequer, to which categories of medicines supplied free of charge HM Revenue and Customs has applied VAT, and for which periods assessments have been issued.
Answered by Dan Tomlinson
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. This is a core and longstanding feature of UK VAT rules.
Whether VAT applies to medicines or treatments provided for free depends on the precise facts of each case.
I have heard concerns from firms and others that these rules have impacted the sector’s ability to donate medicines for free. On 23rd June I announced that the Government would bring forward a new approach to address this issue, which will consist of either changes to the VAT rules or a reimbursement scheme.
The new approach will be effective for all donations made on or after 23rd June.
HM Treasury officials are working with colleagues in DHSC to develop options at pace and engaging closely with industry partners to ensure a solution is fit for purpose.
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