VAT on Air Ambulance Fuel Payments

Debate between Tracey Crouch and Richard Drax

Wednesday 11th July 2012 Commons Chamber

[Richard Drax (South Dorset) (Con)]

It is a pleasure to follow my hon. Friend the Member for Rugby (Mark Pawsey). I am delighted that my hon. Friend the Member for Hexham (Guy Opperman) and the hon. Member for York Central (Hugh Bayley)—he might recall that I used to interview him as a fledgling reporter all those year ago—have brought this matter to the attention of the House.

First, like all other Members I want to pay tribute to the professionalism and bravery of our air ambulance crews. The A31 just outside my home is, sadly, notorious and I often see that yellow bird of mercy landing to rescue people and take them to hospital. It saves countless lives. In my constituency, the Dorset and Somerset Air Ambulance saves lives as we have no motorways as such, at least not in Dorset, and our roads are narrow, which means that getting down them is extremely difficult. It is especially important, therefore, for us to have that air ambulance cover.

Which air ambulances pay VAT on fuel and which do not—I hope I am being accurate because I know we like to be accurate in the House—is a matter of who owns and operates them. As has been said, owner-operators—those who own and operate the helicopter directly through their charities—are seriously disadvantaged. Because they are VAT registered they must pay VAT. In contrast, leased aircraft, operated through a third party, such as Bond Aviation, which is the case for the Dorset and Somerset Air Ambulance, which bills for a total service, including fuel, are exempt under an agreement with HMRC in 2005.

[Tracey Crouch]

It is worth pointing out that not every helicopter that is leased is done so with the fuel included. Some air ambulance helicopters are on a lease agreement, such as the Kent air ambulance, but that does not include the fuel.

[Richard Drax]

I totally accept that. I am not saying that they are all the same. I am looking for some harmonisation. I am not for one minute saying that we should not tackle the VAT issue. However, it seems from my research that there are some anomalies in the system.

Of the 18 charities, operating 29 helicopters, 12 operate such leasing agreements—admittedly, as my hon. Friend said, under different arrangements. For example, our Dorset and Somerset Air Ambulance pays no VAT, while our neighbouring Devon Air Ambulance pays £3,000 a year, which is about the cost of a mission, give or take a few pounds. The situation is clearly deeply unsatisfactory, with thousands of pounds of hard-raised money being squandered needlessly. I would have thought that some harmonisation would resolve the issue.

Overall, the Association of Air Ambulances must pay £100,000 every year in VAT. That rises with every increase in the price of fuel. That sum would pay for about 30 mercy flights to road traffic accidents and medical emergencies and for urgent hospital transfers. As has been said, this is not really about money; this is about saving people’s lives.

It is interesting how many of our valuable services in this country are charitable. Think of our armed services. These are men and women whom we send to places such as Afghanistan who are relying on charity to be looked after. That begs another debate altogether.

I hardly need point out that charging VAT on fuel for our air ambulances is an EU initiative. In a characteristic Catch-22 situation, the EU VAT directive allows no zero-rating provisions, except for those that were in place in 1975. Again as we have heard this afternoon, there were no air ambulance helicopters in the UK in 1975. Only the RNLI has been allowed exemption from duty charges on marine diesel due to its life-saving role—no different, in effect, from that of the air ambulances. With such a precedent already set, it seems an obvious and relatively inexpensive step for HMRC to extend this exemption to helicopter emergency air services.

The Association of Air Ambulances has suggested three solutions, each of which I would commend to the Minister. The first is a total exemption for all helicopter emergency medical services. The second is a refund arrangement provided by HMRC for air ambulance charities. The third is for new legislation to exempt air ambulances from VAT, as with the RNLI.

As all hon. Members have said, this is a worthy cause, and, frankly, the sums of money are a pittance when one looks at the Government’s overall expenditure. I cannot think of a better cause in the big society. That is not a phrase I entirely endorse, but I would use it in this case, because it conjures up the worthiness, bravery and dedication of those who crew the ambulances and the lives that are saved, and, importantly, the knock-on benefits to the families of those who have been injured and who can continue to live their lives with their fathers, mothers, brothers and sisters because they have been rescued by this exemplary service. I hope that common sense prevails today.