Does the PPE tax cut extension hint at longer term cost savings for care providers?
There have been a number of significant changes in recent weeks, as shops and businesses begin to make the slow return to a “new normal” as lockdown eases.
The care sector has been facing a tremendous challenge throughout this crisis and we know that while the worst may be past us, the challenge is set to continue. It is welcome news therefore, that the temporary removal of VAT on Personal Protective Equipment (PPE) has been extended until the 31 October 2020.
The extended cut will ease the burden of tax on the purchase of the essential equipment needed to deal with the COVID-19 emergency; it means that items will be exempt from the usual VAT charges.
Import duty was also removed to drive down costs, and these changes have been estimated to save care providers and businesses millions of pounds overall during the crisis. The government has acted to introduce temporary VAT rules given the exceptional circumstances that we are facing, to mitigate the impact of the COVID-19 pandemic.
The short term decision has opened up a larger conversation about the VAT status of the social care sector as a whole, to enable VAT claims on expenses, such as PPE, utilities, repairs and rent.
Long term changes to the VAT regime could allow the care sector to reclaim VAT on expenditure, having a positive impact on the bottom line and could make the difference between these businesses remaining viable or not.
In the meantime, care providers can continue to buy PPE to keep the most vulnerable protected, with the reassurance that the burden of tax has been eased for the coming months. We hope that this will make a real difference to the sector, which has been doing incredible work.