A news story in The Pharmaceutical Journal news story has been cited in a parliamentary debate on Hospital Improvement Plans: VAT Rules.
Karin Smyth, Labour Party MP for Bristol South, told the House of Commons on 9 January 2020 that “just this week,
The Pharmaceutical Journal reported that 34% of trusts had outsourced their pharmacy service to a commercial firm and 16% have created wholly owned subsidiaries”.
Smyth noted that the practice of outsourcing pharmacy services was “widespread”, but added that similar schemes proposed at Bradford Teaching Hospitals NHS Foundation Trust and the Frimley Health NHS Trust “have been vigorously opposed, particularly by Unison, and it appears that both proposed schemes have been stopped” — which she described as “good news for thousands of low-paid staff who wish to remain NHS employees.”
Smyth added that the establishment of subsidiaries “might make sense in the short term for individual trusts, but it makes no sense for the wider health economy or the whole NHS,” and claimed that “the practice is not a strategic, collaborative or positive solution to the problems that trusts face, and it is not about better employment”.
In response, Edward Argar, the minister of state for health, told MP that plans were already being made to review the VAT rules, adding that “while there can be VAT advantages of forming wholly owned subsidiary companies, we are clear that they cannot and should not be set up for the purposes of VAT avoidance, and we wrote to all provider trusts in September 2017 to remind them of their clear tax responsibilities”.