Compassionate Use Medicine Schemes: VAT

Karin Smyth Excerpts

Thursday 11th June 2026 Commons Chamber

[Dr Caroline Johnson (Sleaford and North Hykeham) (Con)]

(Urgent Question): To ask the Secretary of State for Health and Social Care if he will make a statement on the effect of VAT on the availability of medicines through compassionate use schemes.

[The Minister for Secondary Care (Karin Smyth)]

It is very important for patients to have access to innovative medicines as quickly as possible, especially where there is unmet clinical need or no alternative treatment. We are working to streamline the decisions of the National Institute for Health and Care Excellence and the Medicines and Healthcare products Regulatory Agency so that NHS patients benefit from the latest medicines as soon as they are proven to be safe and effective.

Early access and compassionate use programmes can play an important role in enabling patient access to medicines ahead of routine commissioning decisions. However, we should be clear that these programmes are commercial decisions taken by pharmaceutical companies: companies choose whether and how to provide medicines free of charge to patients and the NHS before the medicines go through licensing, post-trial access or a funding decision.

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 and Customs to explore options to address these issues, as witnessed by my hon. 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, who we have in our thoughts at all times, have access to innovative medicines.

[Dr Johnson]

I declare an interest as a consultant paediatrician. One of the worst moments as a paediatrician is when all treatments have failed and there is no suitable clinical trial. At that point, in those dark moments, compassionate use schemes can be a glimmer of hope, and new unlicensed medicines with clinical potential have been provided free to the patient, and free to the NHS. Last year, however, the Government started charging VAT on the deemed value of those drugs, meaning that companies had to pay tax to give the drugs away. When hearing that “every meeting” with Labour MPs was about

“who can we tax in order to pay benefits to others?”

few would have imagined that that would include potentially lifesaving, charitably given drugs for sick adults and dying children.

Following lobbying by my hon. Friend the Member for Hornchurch and Upminster (Julia Lopez), the Government have paused enforcement while they review the situation, but they have said that liabilities remain, and they are taking too long. Bayer has now withdrawn from the scheme, and others could follow. Patients are at risk. Does the Minister recognise that that makes trials in the UK less attractive, and that HMRC’s pause is not enough? How much money do the Government expect to raise with this VAT? How did the Government find time to reduce VAT on fairground rides at Alton Towers, but not to sort out this problem? How many patients have missed out so far? Does the Minister recognise that this delay could cost lives, and who was the Minister who signed this off? Was it the Health Secretary when he was a Minister in the Treasury?

I understand that the Government say this situation is not new, and that it may apply to a law dating back over 30 years. I gently point out, however, that the application is new, and that the levers to change it—and change it quickly—lie in this Government’s hands. Patients need them to act swiftly.

[Karin Smyth]

I pay tribute to the hon. Lady’s service as a clinician, and she is right to say that, at times, for patients facing such situations, compassionate use schemes are a glimmer of hope, but I think the rest of her comments were ill deserved. I understand the desire of the Opposition to attack a new Secretary of State because he was in the Treasury, but I will move on to the actual issues, because patients care about this. The rules had been in place for a long time when this Government took office, and we have not changed them. We have inherited this system, and we are looking at how we can improve it.

The previous Government could have abolished VAT on such medicines, but they chose not to do so. What is more, since we have been in office, we have struck a deal with the USA that not only guarantees 0% on pharmaceutical tariffs, but changes the old formula that we use for medicines. For the first time in 20 years, the Government are spending more to ensure that our patients are first in the queue for innovative medicines. The previous Government could also have raised the threshold, but they chose not to do so. Now, for example, patients facing Duchenne muscular dystrophy, children as young as 12 who need a brain cancer drug, or those who have a type of rare and aggressive stomach cancer, are being treated.

We recognise the importance of the UK remaining a leading location for life sciences, investment and innovation. That is precisely why we are engaging with industry and partners across the Government to understand and address concerns, including the issue of VAT payable on donated medicines. In considering a way forward, it is important to safeguard the robust and fair system by which routine access to medicines commissioned by the NHS is determined. A range of options are being considered. No decisions have been made at this stage, and I will not pre-empt any.

[Dr Scott Arthur (Edinburgh South West) (Lab)]

I thank the Minister for her response—I am sure she is working hard to resolve this issue. As the hon. Member for Sleaford and North Hykeham (Dr Johnson) explained, a pause was introduced. That was welcomed by charities such as Sarcoma UK, which asked for that pause to be made permanent. If the Minister is working hard to get the Treasury to understand the impact that the VAT charge is having on patients, will she invite a Treasury Minister to meet charities such as Sarcoma UK to hear first hand about the impact of charging VAT?

[Karin Smyth]

I commend my hon. Friend’s work in this area on behalf of patients. As I said, no decisions have been made and we are continuing to work on this issue. The Exchequer Secretary to the Treasury is with me on the Front Bench and will be happy to keep engaging with all interested parties.

[Mr Speaker]

I call the Liberal Democrat spokesperson.

[Helen Maguire (Epsom and Ewell) (LD)]

I was deeply shocked to hear about the change in HMRC’s policy. It is extremely worrying that pharmaceutical companies must now pay VAT on drugs available through compassionate use and early-access schemes. In April, HMRC told the pharma industry that it would pause enforcing VAT bills while the Government considered measures to support the industry in supplying patients who desperately need these drugs. The changes have been mired in uncertainty and misunderstanding, and there has been poor communication from HMRC from the start.

The Government must ensure that they create a workable long-term solution for the pharmaceutical industry to support these patients who are in desperate need. Patients must not lose access to medicines as a result and HMRC must communicate with pharma and patients effectively. For patients of all ages with rare cancer types, schemes such as these are the only way to access potentially life-extending treatment. Has the Minister spoken to cancer charities about the real-life effects that the changes will have? We should be making it easier for patients to access life-extending drugs, not harder. Will the Minister confirm that patients will not be denied lifesaving drugs as a result of these changes?

[Karin Smyth]

I thank the Liberal Democrat spokesperson for her comments. She knows that we engage with the sector all the time and, as I said in my earlier response, we will continue to work with bodies across the life sciences sector and with patients, the NHS, HMRC and the Treasury. A range of options are being considered and no decisions have been made.

[Jerome Mayhew (Broadland and Fakenham) (Con)]

The Minister is responding to this urgent question because the Government have decided to charge VAT on donated medicines used for compassionate EAM schemes. The Minister says, “Well, that is not our fault—the scheme has been around for 30 years”. That may be true, but they have decided to apply the rules for the first time. Why have the Government decided to impose VAT now?

[Karin Smyth]

It is important for hon. Members to recognise the deep concern caused to patients with unmet clinical need, who rely on the glimmer of hope provided by these medicines, when they hear these sorts of exchanges. These are long-standing rules and we continue to engage on the issue.

[Sir Ashley Fox (Bridgwater) (Con)]

It is utterly shameful that this Government are presiding over the imposition of VAT on drugs donated for compassionate use. The Minister referred to the previous Government. VAT was not put on those drugs under the previous Government, but it is being put on them under this Government. Was it the Health Secretary who signed this off when he was in the Treasury?

[Karin Smyth]

The hon. Gentleman’s last comment reveals exactly why he is raising this issue.

[Jim Shannon (Strangford) (DUP)]

Hon. Members have raised concerns for compassionate reasons and on behalf of their constituents who feel the pain. Compassionate access schemes are a critical lifeline for terminally ill patients, often stepping in when the NHS has exhausted all standard funding avenues. Any move by HMRC to levy, to barter or to impose deemed supply VAT on free clinical treatment places an unacceptable risk on voluntary patient provision. I say this kindly, but will the Minister ensure that the Treasury works collaboratively with the devolved health Executive to create a permanent and water-tight VAT exemption, so that no patient, regardless of their postcode, is left behind and compassion is a UK-wide attribute, not a postcode lottery?

[Karin Smyth]

The hon. Gentleman works very hard in this area. He is right to use the word “compassion”, because that is exactly how we must approach the issue for patients who have an unmet clinical need and are desperate for innovation. That is why we are putting our collaboration and work with the life sciences sector front and centre and working closely with HMRC. My hon. Friend the Exchequer Secretary to the Treasury is on the Treasury Bench listening attentively to the issues and we will continue to work together. They are long-standing rules. As the hon. Gentleman would acknowledge, we have made huge progress in this area for patients in this category, particularly with our revision of the National Institute for Health and Care Excellence threshold, and we will continue to do so, on behalf of the patients we all want to help.