§ Mr. O'HaraTo ask the Chancellor of the Exchequer (1) what plans he has to make adjustments to the NHS budget to compensate for extra expenses incurred as a result of the recent change in the regulations governing VAT on incontinence products; [9160]
(2) what estimates he has made of the revenue which will be raised from the recent changes in the regulations governing VAT on incontinence products. [9161]
§ Mr. Oppenheim[holding answer 16 December 1996]: There have been no changes to the regulations governing VAT on incontinence products. VAT has always been chargeable on incontinence products supplied to the NHS. The policy was confirmed in October 1995 following evidence of contrived tax avoidance schemes; but customs set guidelines to enable recovery of tax in cases where NHS trusts truly acted as agents for suppliers or patients. It later became clear that these arrangements did not reflect the normal position in the NHS, and they were withdrawn in August 1996. Few NHS trusts are thought to have used the guidelines, but details are not held centrally and so no reliable revenue estimates can be made. However, the NHS is in any case funded on the basis that its purchases of incontinence products are taxable.
Incontinence products supplied directly to disabled people are zero-rated.