The BMA has urged the Government to grant general practice exemption from VAT, which it says is an ‘extreme financial burden’ for practices and PCNs.
In a letter to the Treasury yesterday, seen by Pulse, GP Committee chair Dr Richard Vautrey welcomed Government proposals to simplify ‘complex, inefficient and overly bureaucratic’ rules for NHS organisations to reclaim VAT.
However, he said the proposals – outlined in a consultation on VAT reform in the public sector – must ‘go further for primary care’, including making practices and PCNs ‘fully exempt from VAT when delivering patient-facing services’.
Currently, PCNs and practices face a ‘large amount of bureaucracy’ because they are reimbursed by the NHS only for the salary and on-costs of staff providing services for them and not the 20% VAT that is applied, he added.
The letter said: ‘Instead, this has to paid for out of PCN/practice budgets, resulting in money being lost from patient-facing support services.
‘Naturally, this places extreme financial burden on PCNs and practices and is impacting their ability to recruit the staff they need to address increasing demand for vital health and care services.’
It added that the ‘only real resolution is to provide primary care with a VAT exemption’.
Dr Vautrey said the Government must resolve the issue ‘as soon as possible’ in order to meet its commitment of 26,000 additional staff in general practice as part of PCNs by 2025.
There has been much confusion around the treatment of VAT for PCNs since they launched. BMA guidance in 2019 suggested some structures of PCNs were more likely to be liable for VAT than others.
When the five-year GP contract was first announced in 2019, accountants warned that GP practices should be ‘thinking twice’ before signing PCN contracts due to potential concerns around VAT and HR issues.
And later that year, it was revealed that PCNs were ‘reluctant’ to recruit additional staff like pharmacists because of uncertainty around VAT issues and concerns around funding.