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Budget 2013: Make healthcare services zero-rated for VAT

March 18, 2013


Type: Care Home Blogs, Dental Blogs, Latest Blogs, Medical Blogs, Pharmacy Blogs, Tax, The Budget, VAT


As part of a series of blogs previewing Budget 2013, Debbie Wood, head of Chiks’s specialist healthcare team, offers her thoughts on what the chancellor can do to help the sector.


As a sector that provides VAT exempt services, it is a continuing bone of contention for healthcare businesses that they are unable to recover the VAT they are charged on direct business expenses.


Make healthcare services zero-rated instead of exempt and then the twenty percent VAT charged on direct expenses will be recoverable. I’m not holding my breath, but I’d like to see government give some consideration as to how this issue could be addressed.


I am concerned about the forthcoming reduction to the annual allowance threshold for pension tax charges from £50,000 to £40,000 as that will put even more GPs into the position of having to pay this tax charge in respect of growth in their NHS pension benefits. At the very least the proposed protection schemes must be flexible enough to work for the NHS Practitioners scheme.


Benefit reform is essential for a number of reasons, but the main one is reducing the welfare spend to enable employer and employee national insurance to be cut to 10 per cent each.


I’d like to see the chancellor take more lower paid workers out of the tax and NIC system altogether by increasing the relevant lower band thresholds. The removal of personal allowances for higher rate earners provides a marginal rate scale that goes 0 per cent, 20 per cent, 40 per cent, 60 per cent, 40 per cent, 45 per cent.


Let’s see some real simplification by scrapping the personal allowance (PA) and introducing a 0 per cent tax band at the rate of the PA (or better £10,000). Basic rate payers would pay no more tax, but all higher rate payers would. Then we could look at scrapping the 45 per cent top tax bracket altogether and encourage entrepreneurs and the captains of industry to earn more and spend more to boost the economy, rather than planning to earn less than the top rate tax threshold and spend less.


Stability and consistency in the tax system are essential, but sadly absent at present.

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