Wrexham care home magnate urges reduction in VAT rate to 5% for social care providers

GOVERNMENT chiefs are being urged to reduce the VAT rate to 5% for social care providers by the owner of an award-winning care organisation.

Care Forum Wales (CFW) said it would make paying for care more affordable for local authorities and the NHS – while helping to stimulate the economy at the same time.

According to CFW, the main organisation representing the social care sector in Wales, the latest 2.5% hike on VAT to 20% adds up to an unfair tax on vulnerable people.

It is therefore calling for VAT rules to be changed at the next Budget in March.

Mario Kreft, Honorary Chief Executive of CFW and owner of Pendine Care Organisation in Wrexham, told Business Post: “We believe the government has missed the opportunity to be really progressive by stimulating the social care economy as well as the wider economy.

“Reduced rates of VAT already exist for things like listed buildings – surely caring for vulnerable people is even more important?”

He added: “Extensions to the homes of disabled people are already zero rated for VAT purposes. We believe, for example, it would be logical to have a similar, zero-rated exemption for extensions to residential care homes.

“This would have the effect of encouraging people to invest in capital items. As things stand, VAT at 20% is a tax on care which makes it prohibitive; to improve quality.”

The idea has received the backing of a leading Chartered Accountant, Peter McVeigh, a director of Wrexham-based Coxeys.

Mr McVeigh said: “As well as providing a much-needed fillip to the economy, this would also be great news for the 500,000 working in the sector and the 450,000 who receive support.

“While the economy is in a particularly difficult phase, there is an opportunity over a period of one or two years to offer special dispensation to the social care sector to invest.”

Mr Kreft pointed to the recent case involving Pembrokeshire County Council where a landmark High Court ruling on care home fees has set a precedent for the rest of Wales. According to the homes who brought the action, the £390 a week the council paid per resident was far short of what is needed – they pointed to the fact that Pembrokeshire paid their own homes considerably more.

As a result, the new rates will apply to all other care homes in Pembrokeshire.

Mr Kreft added: “The case sets an important precedent with regard to the approach which councils in Wales adopt to fee setting. It is now clear that it is no longer acceptable for local authorities to adopt an arbitrary approach to determining the amount they are prepared to pay for care services.”