Home care providers demand zero-rated VAT to protect sector

Home care bosses have called for social care provision to be zero-rated for VAT so that they can reclaim VAT on business expenses to 'support' the sector during the COVID-19 pandemic.

Goods and services offered by care operators are currently exempt from VAT, so providers do not charge VAT on their services. But home care leaders want the UK government to change their VAT status from exempt to zero-rated because they cannot reclaim VAT on expenses.

Home care providers speaking at a recent webinar, said any savings would be re-invested into their businesses to benefit their frontline care workers and the people they care for during the pandemic.

Ken Deary, chief executive of Right at Home UK, said: “The pandemic has shone a light on the vital work carried out by the social care sector like at no time before.

“By taking action now on VAT the government can finally recognise the vital role we all play on the front line and support us to future proof the home care sector for years to come.”

The home care bosses argue that the sector, which is made up of many small, independent operators, is experiencing increasing cost pressures, largely due to the high level of regulation they face. In May, homecare.co.uk highlighted the home care sector's campaign for zero rated VAT.

From 1 May, PPE purchased by home care providers, care homes, businesses, charities and individuals to protect against COVID-19 became free from VAT for a three-month period. Up until then it was only the NHS that has been exempt from paying VAT. But home care leaders say the Treasury's move did not go far enough.

In a letter sent to Rishi Sunak, home care owners at Home Instead Senior Care, Right At Home, Radfield Home Care, Bluebird Care, KarePlus and Heritage Healthcare said social care services should become zero-rated which would mean that ‘we would not charge VAT on our services to the most vulnerable in society but could reclaim VAT on our expenses such as PPE, utilities, rent, repairs, and many other services’.

The group believes they should operate under the same VAT regime as mobility aid retailers, which serve practically the same client base, who are already zero rated. Home care bosses argue the cost to the Treasury of changing their VAT status from ‘exempt’ from VAT to zero-rated VAT would be ‘relatively small’ annually but would make a ‘significant’ contribution to keeping ‘financially under pressure social care providers in business’.

The campaign is backed by: Martin Jones, chief executive of Home Instead Senior Care, Ken Deary chief executive of Right At Home, Lisa Fyfe finance director from Caremark, Alex Green director of Radfield Home Care, Wayne Smith acting managing director at Bluebird Care, Yvonne Tomlinson chief executive at KarePlus and Michelle Fenwick director of Heritage Healthcare.

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