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Monitor rules out corporation tax exemption for private NHS providers

The regulator Monitor has said it will not be recommending that private companies should be exempted from paying corporation tax on services provided to the NHS.

Earlier this week it emerged that a consultation document from Monitor had warned that private providers could find the costs of having to pay corporation tax and VAT to be ‘prohibitive’ when entering the NHS market – a warning that triggered a wave of headlines and national press coverage.

The discussion paper on the ‘Fair Playing Field’ review said that ‘tax asymmetries’ had been raised in the course of the review and asked for respondents to provide specific examples of instances where costs arising from tax differences between NHS, private sector, voluntary and charitable providers had had an impact.

Currently public sector hospitals do not pay corporation tax and VAT on supplies, unlike private providers, who some say are disadvantaged under the rules.

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.’

But in a short statement issued today, Monitor said: ‘There is no draft report of the Fair Playing Field Review and Monitor does not intend to provide a running commentary on the review. Monitor has yet to decide what recommendations it will make to the Secretary of State. However in the light of recent media speculation, Monitor has decided to clarify the position on one specific issue. While it is the case that corporation tax is one of many distortions that the review is looking at, Monitor will not be recommending that private sector providers should be exempt from paying corporation tax.’