NHS trusts using “outsourcing” loophole to avoid paying tax

Half of NHS trusts are using a loophole to avoid paying VAT, new data has revealed.

A new government report shows that 50% of all NHS trusts are using a “subsidiary” outpatient pharmacy. These subsidiaries are arms-length companies that provide pharmaceutical services, yet are exempt from paying VAT.


Indeed, a current tax exemption states that hospitals can “enter into a contract with a third-party pharmacy company to operate a pharmacy in the hospital to dispense qualifying goods to outpatients”, with these “qualifying goods” being exempt from VAT.

34% of trusts have outsourced outpatient pharmacy to a commercial firm, with 16% having created a ‘wholly owned subsidiary’ (WOS) pharmacy – a company owned by the trust yet separate from it.

Unions have additionally warned that WOS pharmacies allow the erosion of conditions for NHS staff members.

Helga Pile, deputy head of health at Unison, told The Pharmaceutical Journal that outsourcing outpatient services “creates major concerns about quality and accountability”.

“The reality is that staff working for these companies will often be earning significantly less than colleagues who are employed directly by the NHS,” she added.

What’s more, Unison says that WOS pharmacies often provide inferior pensions arrangements to new starters, versus the pensions package that would be offered directly by the NHS.

It’s clear that the backdoor privatisation of the NHS isn’t set to end any time soon – and certainly not under this Tory government.


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