Question to the HM Treasury:

To ask the Chancellor of the Exchequer, if she will make an assessment of the potential merits of removing the VAT charges on medicines dispensed in hospitals.

Where medications are provided as part of the NHS’s statutory obligation of medical care, they are exempt from VAT. This means that medications are VAT-free for patients when provided to an in-patient in hospital. Furthermore, medications for out-patients prescribed by most hospital pharmacies are zero-rated for VAT, meaning that these pharmacies can recover their VAT costs and the medication is also VAT-free for patients.

While the NHS is unable to reclaim its VAT costs, due to the exemption, this irrecoverable VAT is taken into account in NHS funding.