Clinical teachers fret overVAT trap

December 16, 2005

A ruling by customs officers over tax arrangements at Glasgow University has aroused fears that hospitals across the country may have to pay tens of millions of pounds in VAT for the work of clincal academics despite government reassurances that academic work falls outside VAT rules, writes Becky McCall.

Glasgow's medical school now charges National Health Service hospitals VAT after a tribunal held by Her Majesty's Revenue and Customs ruled that, in this case, clinical academics' salaries were subject to standard-rate VAT and were within the tax's scope.

Although the case is said not to set a precedent, there are fears that Customs officials might apply the rules across the sector, which could cost the NHS £60 million.

Michael Rees, head of the Medical Academics' Committee of the British Medical Association, feared the repercussions on clinical academic recruitment. "If applied across the UK, this tax arrangement would ratchet up financial pressure on universities and hospitals - seriously jeopardising the ability to advance patient care, train tomorrow's doctors or remain anything like a world leader in clinical research."

Lord Warner, Minister of State for NHS Delivery, raised the issue in the House of Lords this month. "A form of contract has been devised that satisfies the contractual requirements of Her Majesty's Revenue and Customs so that clinical academic posts remain outside the scope of VAT."

Katie Petty-Saphon, director of the Council for the Heads of Medical Schools, said no precedent had been set. "Elsewhere the status quo exists, so the salaries of NHS-funded clinical academics remain outside the scope of VAT." She will meet Customs officials in January to resolve technical issues of joint contracts.

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