The regulator Monitor is consulting on whether private NHS providers could be made exempt from corporation tax and be allowed to claim back VAT to bring them in line with public hospitals.
Currently public sector hospitals do not pay corporation tax and VAT on supplies, unlike private providers, who some say are disadvantaged under the rules.
As part of a discussion paper on the ‘Fair Playing Field’ review, Monitor said these two costs could prohibit private firms from entering or expanding in the healthcare market.
The discussion paper said: ‘These two issues can both mean that in some circumstances certain provider types are, as a result of their corporate form, subject to additional costs compared to other providers. This may in turn result from them finding the costs of expanding or entering a new market to be prohibitive.’
As part of the review, Monitor asked for responses on whether costs arising from tax differences between NHS, private sector, voluntary and charitable providers have had an impact on decisions from providers about whether to bid for contracts, or provide services covered by AQP.
David Worskett, director of the NHS Partners Network, said that charities and social enterprises were also being disadvantaged: ‘It is important to remember that charities and social enterprises are subject to these tax disadvantages relative to the NHS as well.’
‘So from the point of view of the whole independent sector – not-for profit and for-profit – it would be very welcome if significant disadvantages could be addressed. Only by doing so can commissioners have confidence that they have access to a choice of the best providers in the interests of patients.’
But Dr Marie-Louise Irvine, a BMA Council member and GP in Lewisham, southeast London, said the proposal was ‘appalling’ as the NHS already bears the burden of training costs.
She said: ‘These companies want to siphon off profits from the NHS, which should be spent on patient care and now they’ll be exempt from paying tax. They say it’s not a level playing field, but that’s not the case. The NHS trains all doctor and healthcare workers- who are free to go on to work in the private sector. Training is a big cost that the private sector doesn’t shoulder.’
A DH spokesperson said that private providers must show that their income benefits the NHS.
They said: ‘We have always been clear that any income from private sources must benefit NHS services. This applies to Foundation Trusts and they must publish in their annual reports how money earned in this way has benefitted NHS patients.’
‘We have commissioned Monitor to carry out their Fair Playing Field Review. Once it has been completed and submitted to the department, we will consider how to respond.’
A spokesperson from Monitor said that they asked for contributions on tax in their consultation, but had yet to come to a conclusion.
They said: ‘We will not report to the Secretary of State until March and have not yet decided whether to make any recommendations about tax in the report.’
This story was updated to clarify that Monitor was consulting on tax exemption and to include a link to the discussion paper.