Cost of facemasks to rise as Treasury scraps VAT exemption on PPE

The cost of disposable face masks is set to rise by a fifth from next week, the Telegraph can disclose, after the Treasury decided to scrap the VAT exemption on Personal Protective Equipment (PPE).

In correspondence seen by the Telegraph, retailers were informed that the six month VAT holiday on PPE would come to an end on October 31.

The 20 per cent VAT levy, usually charged on items of PPE, was temporarily waived at the beginning of May in a bid to relieve the burden on frontline workers, who were having to buy large stocks in order to keep the country going during lockdown.

It was especially welcomed by care home providers, some of whom were having to spend tens of thousands of pounds a week on equipment to keep their staff and residents safe and unlike many businesses cannot reclaim the tax.

But the VAT cut was also an important financial benefit to millions of ordinary members of the public, when the law was changed in July requiring them to wear face masks when entering shops and travelling on public transport.

Among the items that were declared VAT free were disposable gloves, disposable surgical face masks and full face visors.

Tens of millions of the blue disposable IIR masks, which are supposed to be single use, have been sold in the UK since the start of the pandemic.

It is estimated that the cost of waiving the VAT on PPE from the beginning of May until the end of October will be around £200 million.

But Treasury officials have now taken the decision to scrap the VAT exemption, claiming that stocks and prices of PPE have now stabilised.

From November 1, the full 20 per cent VAT, will be charged on these items.

Care homes providers have reacted angrily however, accusing the Treasury of failing to appreciate the impact the rises could have on the already struggling sector.

Last month Matt Hancock, the Health Secretary, announced a £550 million plan to help provide care homes with the PPE they needed over the next six months for free.

But providers have said the scheme, which is capped, does not fulfil all of their needs, meaning providers still have to buy equipment privately on top of what the Government provides.

Nadra Ahmed, chairman of the National Care Association, said: “Even under the new scheme most providers are having to purchase more PPE on top. The 20 per cent extra they will be paying in VAT will have an impact.

“We are hearing some very clear messages coming out about the sector warning that it is at a tipping point.

“There was an expectation within the sector that the VAT exemption would last until the end of the pandemic. This is an extra financial burden that will not have been costed and in some cases could be the difference between them being able to continue operating. It is outrageous.”

Raina Summerson, group chief executive of care provider, Agincare, said: "People think that we are now getting PPE for free but we are not getting anywhere near enough. There are problems with the way the system has been set up and there have also been supply issues.

"I would estimate we are currently getting around 30 per cent of the PPE that we require through the Government's portal. We cannot afford to not have, what we need, when we need it, so we are having to purchase extra PPE on top. I would expect that the additional costs from the VAT rise could mean some providers are no longer viable."

Vic Rayner, Executive Director at the National Care Forum added: “This is particularly unhelpful to stop this at this time. In the first instance, it doesn’t take account of large parts of the care sector who are not eligible for the government’s free PPE offer.

"Secondly, care providers have already spent enormous amounts of money on PPE and will continue to have to purchase PPE that is not supplied by the portal.

"All care providers are facing huge financial pressures as they are delivering care within the pandemic, and for the government to shut the door on this VAT break is plain wrong.”

A Treasury source said: This relief was designed to relieve the burden of VAT on the price of purchasing PPE used for protection from coronavirus by front line workers, and has particularly aided sectors that cannot recover VAT on such goods due to their VAT exempt status, such as care homes.

"Since then, DHSC have stabilised the UK PPE supply chain to meet current demand and are building a stockpile which will be in place by the 1 November.

"The temporary zero-rate of VAT on PPE is therefore no longer required and will end on the 31 October 2020 as planned.  From 1 November 2020 the VAT treatment for supplies of PPE will revert back to the standard rate."