The call for an exemption comes after a government consultation on VAT last year set out proposals for reform. The consultation document admits that 'extra cost and complexity' for public sector organisations around VAT charges 'can influence decisions on how public bodies operate and how public services are provided, in a way which VAT was never intended to do'.
For general practice, VAT has become a problem following the creation of PCNs. Although the provision of healthcare services is VAT exempt, the provision of staff is not - and charges arise within the network model because staff employed by the PCN or a lead practice may be supplied to - and supervised by - another practice within the group.
In a letter to financial secretary to the Treasury Jesse Norman last week, the BMA said VAT 'is generally applied when paying for staff members who provide a service for a PCN/practice'.
GP funding
For these staff, practices or PCNs pay their full salary and on-costs, plus an extra 20% for VAT. But the practice or PCN can only claim back the salary and on-costs from the NHS - and not the VAT.
The BMA 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.'
The BMA said it had been working to find a solution prior to the pandemic with NHS England, the Association of Independent Specialist Medical Accountants (Aisma) and HMRC - but warned: 'It has become increasingly clear that the only real resolution is to provide primary care with a VAT exemption.'
Aisma board member Andrew Pow, of Mazars LLP, told GPonline: 'By creating PCNs through the DES route NHS England has produced the situation where one practice can employ a member of staff who works in and is supervised by another practice in the network.
VAT charges
'It is that need to share staff which has led to the VAT issue, since the supply of staff in these circumstances is not normally covered by the healthcare exemption. As additional roles reimbursement scheme funding increases it is proving harder for practices to keep below the £85,000 VAT registration threshold.
'The solutions lie in either creating limited companies within the NHS to operate PCN activities, for NHS England to change how it commissions PCNs to provide services which would effectively mean by-passing practices, or for the government to change the VAT rules.
'The latter will be harder as VAT rules do not just impact the GP sector and sector-specific VAT changes are difficult to implement. It is important that PCNs do not sleep-walk into a problem and now actively consider how they are operating.'
