Contribution
It is a pleasure to respond to this debate. I thank my hon. Friend the Member for Uxbridge and South Ruislip (Danny Beales) for securing it, and for all his engagement and campaigning on this important issue. I know from my conversations with my hon. Friend that he cares deeply, as do I, about ensuring that patients can access innovative medicines, particularly when there is unmet clinical need.
Free-of-charge arrangements play an important role in giving patients early access to medicines, as my hon. Friend so powerfully illustrated when he spoke about the patients and families who have shared their stories with him. I was moved to hear the experiences of those patients, and am grateful to my hon. Friend for sharing them this evening. My thoughts, as I am sure every Member’s thoughts will be, are with those patients and families, including the family of the young woman who my hon. Friend told us had tragically passed away. I am sure that everyone in this House agrees that we must find a solution that means that those patients, and others like them, can continue to access lifesaving medicines.
Before responding to the points made, I will first set out some of the context for the existing VAT treatment of donated medicines. This evening’s debate concerns the application of long-standing VAT rules to some medicines supplied free of charge. Under UK VAT law, some transactions where no money changes hands are treated as though a supply has been made, and these are known as deemed supplies. These rules help to keep the VAT system fair where a business has reclaimed VAT on its costs. These are not new rules introduced by this Government; they are long-standing features of the VAT system dating back to the early days of VAT, before the VAT Act 1994.
His Majesty’s Revenue and Customs wrote to the sector in 2023 as part of the process of ensuring that businesses pay the correct tax. However, the Government recognise concerns raised by pharmaceutical companies and patient groups about the potential impact of this treatment on free-of-charge access and, ultimately, on patients. That is why, as my hon. Friend mentioned, on 23 June, my predecessor announced that the Government would bring forward a new approach as soon as possible. As set out in the written ministerial statement on 2 July, the Government are considering either changes to the VAT rules or a reimbursement scheme. The new approach will be effective for donations made on or after 23 June 2026.
Officials in the Treasury, HMRC and the Department of Health and Social Care have been working closely together and engaging constructively with the pharmaceutical sector to develop the detail of both options. That work must ensure that any approach supports patients while being legally robust, operationally workable and sustainable. We recognise that free-of-charge medicines are supplied through a variety of arrangements. Those include early and expanded access, post-trial access and arrangements that operate after Medicines and Healthcare products Regulatory Agency authorisation.
My hon. Friend raised the question of which medicines would be in scope of the new approach, and the Government are considering this question carefully in collaboration with the sector. The solution must capture genuine patient access arrangements without creating unintended consequences elsewhere in the VAT or supply systems. It is important that we complete that work quickly, so that patients across the UK can benefit from innovative medicines as quickly and safely as possible. It is equally important that we get this right to avoid inadvertently omitting important avenues by which medicines are donated, or opening the door to abuse. That is why we are working closely with industry to craft the scope appropriately.
My hon. Friend asked which forms of donation would be in scope, and whether the solution would apply only to donations to the NHS. He will appreciate that I am not in a position to announce any final decisions today, while work remains ongoing with the firms. However, I can reassure him that I have no desire to artificially circumscribe the scope of the new approach and unduly leave out genuine donation practices.
My hon. Friend asked about timelines. I regret that as we are talking about a potential tax change, I cannot give further detail, beyond reassuring him that I have reiterated the urgency that we both feel, and the need to reach a swift resolution, and I have imparted that urgency to my officials. On historical liabilities, the new approach will apply to donations made on or after 23 June 2026, but I am happy to hear input from firms on that point as we go through the process. On co-ordination in the case of AstraZeneca, it would not be appropriate for me to comment on the tax affairs of an individual taxpayer, but I would certainly encourage firms in the round to share the detail of any specific concerns they have with my officials. On whether HMRC could publish a business brief to fix this issue, as a matter of existing law, firms must account for VAT on donated medicines. An HMRC brief can communicate a change in policy only when the law itself has changed, or following a judicial decision requiring a change in law. A Revenue and Customs brief cannot itself make the change in law.
Finally, I share my hon. Friend’s desire to see Bayer return to the early access scheme, so that patients can regain access to innovative medicines. We have committed to applying the new approach retrospectively to donations made on or after 23 June 2026, and I hope that Bayer takes confidence from that and rejoins the early access scheme as soon as possible.