VAT on fuel for the Air Ambulance Service
The Petition of residents of Hexham,
Declares that the Petitioners believe that the Air Ambulance Service should be afforded a similar exemption from VAT on fuel to that enjoyed by the Lifeboat Service; and notes that the Air Ambulance service provides an essential service that is funded by charitable donations, saving successive Governments millions of pounds.
The Petitioners therefore request that the House of Commons urges the Government to review VAT arrangements on fuel for the Air Ambulance Service is not subject to VAT.
And the Petitioners remain, etc.—[Presented by Guy Opperman, Official Report, 11 July 2012; Vol. 548, c. 416.]
[P001108]
Observations from the Chancellor of the Exchequer, Treasury:
The Government thank the hon. Member for Hexham (Guy Opperman) for his petition on VAT on air ambulance fuel. We fully appreciate the valuable work carried out by all rescue teams, and welcomed the parliamentary debate on 11 July about this very important issue.
Charities are at the heart of the Government’s ambition to build the Big Society. To help support this, the Government provide charities with over £3 billion a year in tax reliefs, which includes around £200 million in reliefs from VAT.
As far as VAT on lifeboats is concerned, the EU VAT directive provides a relief from VAT for fuel in sea rescue vessels. This is one of a number of VAT reliefs that apply for international transport, but it also extends to the fuel supplied to the Lifeboat Service. However, there is no equivalent provision which would apply to charities providing an air ambulance service.
Air ambulance charities currently operate in many different ways, which will determine whether they pay VAT on supplies received, and the extent to which this can be recovered. There are a number of specific VAT reliefs which apply to air ambulance charities. Full VAT relief applies to the purchase of air ambulance helicopters, saving £600,000 on the cost of a £3 million helicopter, and on leasing costs, saving £86,000 a year based on a standing charge of £36,000 a month. If the lease contact includes fuel, then this will also be zero rated. Furthermore, aviation fuel can be purchased exempt from excise duties, and at a reduced VAT rate of 5%.
However, there are some charities that do pay the standard rate of VAT on fuel and it is right to look further at whether the impact of VAT can be mitigated. In the debate, the Government committed to reviewing tax and operational issues around the Air Ambulance Service. However, it is important that we fully understand the operating models and funding arrangements of air ambulance services before narrowing our focus onto the specific issue of VAT.
The Department of Health is committed to undertaking a “fair playing field review” which will examine whether there are inequalities in the treatment providers of NHS funded services, and if so what can be done to address these. In addition they are considering the capability and funding of emergency medical care of the type provided by the London Air Ambulance. HM Treasury officials will be working with colleagues in the Department of Health to discuss both reviews. If neither addresses the issue of the VAT regime applicable to the air ambulance service, the Treasury will undertake its own separate review.