Compassionate Use Medicine Schemes: VAT

Lord Kamall Excerpts

Tuesday 16th June 2026 Lords Chamber

The tax system is, as Members know, a matter for the Chancellor, so I will not get into details about that at the Dispatch Box, but under long-standing VAT rules, supplies of goods free of charge can still be treated as taxable ‘deemed supplies’ where input tax has been recovered. That means that VAT can apply even where no payment is made, reflecting established principles of the tax system. We recognise the concerns raised by industry and others about the potential impact of this treatment on the provision of free-of-charge medicines. We are working closely with the Treasury and His Majesty’s Revenue & Customs to explore options to address these issues, as witnessed by my honourable friend the Exchequer Secretary to the Treasury, who is here with me on the Front Bench. We will carefully consider the legal, fiscal and operational implications of any potential changes. Until then, we will continue to engage constructively with industry, the NHS and all our partners to make sure that British patients, whom we have in our thoughts at all times, have access to innovative medicines”.

[Lord Kamall (Con)]

My Lords, I thank the Minister for accepting this Urgent Question repeat. Life science companies have warned that the decision to charge VAT on early access and the innovative medicines that they provide free of charge could lead to them ending providing these free treatments to patients before routine NHS funding is available. The second fact is that recently released government papers reveal that the Cabinet is being asked to look at who they can tax to pay more in benefits. I have three quick questions. First, can the Minister unequivocally state that these two issues are not linked? Secondly, what discussions have the Government had with life science companies, especially those that have raised concerns over charging VAT on free medicines? Thirdly, have the Government looked at whether they could spend that revenue from VAT on improving access to innovative medicines?

[The Parliamentary Under-Secretary of State, Department of Health and Social Care (Baroness Merron) (Lab)]

It is important to say, first, that this is not a new policy. There is recognition that while early access and compassionate use programmes are crucial, they are voluntary for pharma companies, which are aware, as I say, that VAT is applicable in these instances; it has been in place for decades. To be brief in answering the questions, first, I am not aware of the second issue that the noble Lord raised with regard to discussions—this is a totally different matter, in any case. Secondly, we are working closely with pharma companies, patients and anybody else who needs to be involved to find a sensible solution on this long-standing policy, which I understand was particularly discovered in 2023 by HMRC—so we are dealing with it from then. I have forgotten the third question, but I would be happy to write—oh, I know it. Yes, we always look at where revenue can be used, in a generic sense, but what matters here is that is not new. It was discovered in 2023, and it is entirely up to pharma companies—to which we are most grateful for the compassionate use of medicines, I should add—whether they wish to do it.