Clause 189 - Repayments of value added tax to health service bodies

Finance Bill – in a Public Bill Committee am 11:00 am ar 18 Mehefin 2013.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Question proposed, That the clause stand part of the Bill.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

This short technical clause ensures that certain health service bodies created by the Health and Social Care Act 2012 are added to the list of bodies that may claim refunds on VAT if they pay for certain goods and services, in the same way that their predecessor bodies were able to. These new bodies obviously include the new clinical commissioning groups and the three bodies whose status the Act changed from special health authorities to non-departmental public bodies.

We touched on the creation of these new bodies in our discussion of clause 36, which ensures that the same bodies will also be exempt from corporation tax. We could talk, as we did in that discussion, about the views of Labour Members of the Committee on the 2012 Act. However, we have already put those views firmly on the record, so I will not detain the Committee unnecessarily this morning by repeating them, which I am sure you will be relieved to hear, Mr Amess.

However, to complement our discussion of clause 36 and as the explanatory note explains, this clause provides that Government Departments may claim a refund on the VAT if they pay for certain goods and services, to the extent that the Treasury so directs. That is obviously to ensure that the VAT is not an obstacle to contracting out activities to the public and voluntary sectors. However, for the sake of transparency, can the Minister clarify the expected cost to the Exchequer of this particular measure? Also, can he give details of any assessment  that has been made of the nature of the activities that these four bodies are expected to contract out that they have not already contracted out?

Photo of David Gauke David Gauke The Exchequer Secretary

It is a great pleasure to serve under your chairmanship this morning, Mr Amess.

As we have heard, clause 189 ensures continuity of VAT funding arrangements following the enactment of the Health and Social Care Act 2012, and this is a consequential amendment. Let me briefly provide hon. Members with background information.

Government Departments and a variety of NHS bodies, including primary care trusts and special health authorities, get VAT refunded on certain services. NHS bodies are refunded VAT on certain services purchased for a non-business purpose, such as free health care, if the bodies are named in VAT legislation. However, as a result of the Health and Social Care Act 2012, PCTs were abolished and replaced by the NHS Commissioning Board and clinical commissioning groups. Previously, the NHS Commissioning Board was a special health authority and it has now become a non-departmental public body. The National Institute of Health and Clinical Excellence and the NHS Information Centre were abolished and replaced by two new non-departmental public bodies: the National Institute for Health and Care Excellence, and the Health and Social Care Information Centre. All those changes occurred from April 2013, and mean that the organisations are no longer named under value added tax legislation, so they cannot be refunded VAT on certain services.

Clause 189 ensures continuity of VAT funding arrangements, following the enactment of the Health and Social Care Act 2012. The changes under the clause will apply to four bodies: the NHS Commissioning Board; clinical commissioning groups; the National Institute for Health and Care Excellence, and the Health and Social Care Information Centre. Those changes will ensure that what would otherwise be irrecoverable VAT does not dissuade NHS bodies from contracting out activities, if that would be more efficient.

I wish also to highlight the fact that the 2013 Budget announced further changes to the legislation. The Government plan to give refunds of VAT to two other NHS organisations: Health Education England and the Health Research Authority, when they become non-departmental public bodies in 2014. The hon. Member for Newcastle upon Tyne North asked whether the new bodies would be carrying out the same activities as those they are replacing. I can confirm that that is the case. She also asked about the cost of the measures. It is a matter of continuing with the same practice, so the measures are not expected to have an Exchequer impact. In conclusion, the clause is one of several consequential changes to tax legislation to reflect the reforms to the NHS and provide continuity of VAT treatment to certain NHS bodies.

I take this opportunity to say that, in Committee on Thursday afternoon, in response to a question from the hon. Lady about the number of taxpayers who might be subject to the capital gains tax charge on disposals of United Kingdom residential property worth more than £2 million held by companies and some other non-natural persons, I misspoke by saying the estimate was that  fewer than 20 non-natural persons might pay the CGT charge each year, when I should have said that the estimate was fewer than 200. However, I hope that it remains clear that an extremely small proportion of companies other than non-natural persons, whether UK or non-resident, will pay the new charge each year. Having made that correction and explained the purpose of the clause, I hope that it will stand part of the Bill.

Question put and agreed to.

Clause 189 accordingly ordered to stand part of the Bill.