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U.K. Opposition Slams Plans to End VAT Break on PPE

Posted on Oct. 28, 2020

The U.K. Labour Party criticized HM Treasury for declining to extend a temporary VAT break on personal protective equipment (PPE), saying it was “unbelievable” that the government would reinstate the tax amid the coronavirus pandemic.

Shadow Financial Secretary James Murray slammed the “mask tax” while COVID-19 cases are increasing across the United Kingdom. As cases rise, “the government should be doing all it can to help people follow its own guidance to wear a mask, not ramping up the cost of buying one,” Murray said in an October 25 statement.

The government zero-rated PPE that businesses, care homes, charities, and individuals buy for three months starting May 1 and extended that break until the end of October.

However, the government has no plans for a third extension, meaning that as of November 1, PPE will again be subject to a 20 percent VAT rate. That would mean a family of four could end up spending an extra £94 on disposable masks, Murray said.

The relief was meant to ease the VAT burden on the sectors that the pandemic has hit the hardest, where PPE supply didn’t meet demand, according to Treasury. Now that PPE supply and demand has stabilized, the VAT break is not as effective as it was at the beginning of the pandemic, it added.

“The VAT relief on PPE was designed to accelerate supply of PPE to the health and social care sectors, saving them around £200 million when they needed it most,” a Treasury spokesperson said in a statement emailed to Tax Notes October 27. “Now, we have committed to provide free PPE for Covid-19 needs to adult social care — the main beneficiaries of this tax incentive — until March 2021.”

Because the government will supply COVID-19-related PPE to adult social-care-related sectors, the VAT burden still won’t affect frontline workers, according to Treasury. The government started stockpiling PPE after the PPE supply chain had stabilized in the United Kingdom, and it expects to have sufficient supplies in place by November 1, Treasury added.

Businesses making taxable supplies are able to recover VAT they pay on PPE purchases as business expenses, so they will be able to reclaim VAT on such purchases made after October 31, Treasury noted.

The news comes shortly after Chancellor of the Exchequer Rishi Sunak announced more coronavirus-related support for U.K. businesses, including increased grants under the government’s coronavirus support schemes. Sunak had also introduced the job support scheme, which replaces the coronavirus job retention scheme starting November 1, as part of his winter economy plan, presented on September 24.

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