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Social Services: VAT

Answer

Supplies of care services are exempt from VAT if they are supplied by eligible bodies, such as public bodies or charities. No VAT is charged to the consumer of the service, nor can the supplier recover VAT incurred in the course of providing the service.

Community interest companies (CICs) are not charities in law and must meet the criteria of being state-regulated in order to provide VAT-exempt care services. If CICs do not qualify for the VAT exemption, they charge VAT on the services they provide at the 20% standard rate.

Under Section 33 of the VAT Act 1994, certain bodies, including local authorities are able to recover VAT incurred in the course of their non-business activities. Non-business activities are broadly activities which are not undertaken to generate income, such as the provision of statutory health and social care services. Further information can be found here: https://www.gov.uk/government/publications/revenue-and-customs-brief-10-2022-vat-business-and-non-business-activities/vat-business-and-non-business-activities

The objective of the Section 33 refund scheme for local authorities is to prevent these bodies from needing to use local taxation to fund their VAT costs. Extending the scheme to include charities and community interest companies would not meet this objective.

Secondary information

Type

Written question

Reference

2407

Session

2026-27

Grouped for answer

Yes

Subjects

Social services VAT Civil society

Link

View this Written question on www.parliament.uk