The Chancellor made a number of significant announcements for the Health sector, specifically targeting the record-high waiting lists which have worsened as a result of the Covid pandemic.

£5.9 billion will be used to fund physical infrastructure and equipment, with £2.1 billion specifically earmarked to improve digital capabilities. This is in addition to the investment already announced in September and will be funded through a combination of the new Health and Social Care Levy and an increase in National Insurance contributions which will take effect from April next year.

Aside from the well-received announcements on additional funding, there were surprisingly fewer than expected tax changes which will directly affect NHS bodies, which we have set out below.

Employment Tax

The main change for the year ahead is the previously announced 1.25 percentage point National Insurance Contribution (NIC) increase from April 2022, which will fund social care prior to the introduction of the separate Health and Social Care Levy from April 2023.

Other announcements concerned:

Public sector pensions – legislation will be introduced to ensure that the pensions tax framework applies as intended to public sector pension reforms (broadly, that compensation payable is not taxable, and individuals are not taxed on any retrospective breaches of pension savings limits as a result of the McCloud case remedy);

Pension tax relief for low earners in net pay arrangements – To prevent low earning individuals’ take-home pay being affected by the way their pension scheme operates tax relief, the government will introduce direct top-up payments for affected net pay arrangement scheme members. These will start to be paid from 2025/26 in relation to contributions made in 2024/25 onwards;

Income tax – as already announced, the personal allowance and higher rate threshold remain frozen and the additional rate threshold remains at £150,000;

Benefits in kind – the van benefit charge and fuel benefit charges for cars and vans will rise in line with CPI from 6 April 2022;

National Living Wage – as anticipated, an increase in the National Living Wage / National Minimum Wage rate, such that employees aged 23 years and over will be entitled to £9.50 per hour for pay periods starting from 1 April 2022; and

High-skilled migration – a new Scale-Up visa will launch in Spring 2022 to help eligible growth businesses recruit key overseas talent who meet certain language requirements and have a salary of at least £33,000.


The key updates that the sector need to be aware of are:

Exemption for Dental Prosthesis Imports - The VAT exemption for dental prosthesis is to be extended. The VAT exemption applies to dental prosthesis supplied by registered dentists, dental care professionals and dental technicians to imports of dental prosthesis by these persons. This measure will exempt dental prosthesis items supplied into and within the UK, including between Great Britain and Northern Ireland.

NHS COS regime update - There is no further details regarding any future changes to the COS VAT reclaim rules. It has been stated that the Government will be bringing forward a further set of tax administration and maintenance announcements in the autumn and we will monitor that for further announcements.

Corporation Tax

Foundation Trusts and other NHS bodies have an exemption from corporation tax.  Notwithstanding this corporation tax may be relevant where the Trust undertakes joint ventures or establishes subsidiary ventures.  The key budget highlights which could impact are as follows:

Corporation tax rate – As previously announced the rate of corporation tax will increase from April 2023 to 25% on profits over £250,000. The rate for small profits under £50,000 will remain at 19%, and there will be taper relief for businesses with profits between £50,000 and £250,000, so that their average rate is less than the main rate.

Annual Investment Allowance (AIA) – The temporary £1 million allowance is to be extended to 31 March 2023. The AIA is a 100% allowance for qualifying expenditure on plant and machinery up to the available allowance.

Review of R&D tax reliefs - Following from the recent consultation R&D tax reliefs will be amended to expand the categories of qualifying expenditure to include cloud computing and data costs, whilst legislating to limitation R&D tax relief to expenditure incurred in UK. These changes will take effect from April 2023.

Residential property developer tax (RPDT) - The new tax will apply from April 2022 on profits from the development of UK residential property. The tax will be charged on profits exceeding £25 million (therefore only affecting large companies) at a rate of 4%.

Business rates – The government announced a number of measures in relation to business rates in England including:

  • Freezing the business rates multiplier until 31 March 2023;
  • Introducing a 100% improvement relief for business rates. This will provide 12 months relief from higher bills for occupiers, where eligible improvements to an existing property increase the rateable value. The government will consult on how to implement this relief, which will take effect in 2023 and be reviewed in 2028;
  • Introducing from 1 April 2023 until 31 March 2035 targeted business rate exemptions for eligible plant and machinery used in onsite renewable energy generation and storage, and a 100% relief for eligible heat networks, to support the decarbonisation of non-domestic buildings; and
  • Increasing the frequency of business rates revaluations so that they take place every three years instead of every five years, starting in 2023.


Uncertain Tax Treatment ("UTT") legislation As way of an update to Budget 2020, the Government published draft legislation a few months ago on a new requirement, for large businesses (broadly companies and partnerships with UK turnover greater than £200 million per annum or a UK balance sheet total over £2 billion) to notify HMRC where they have adopted an uncertain tax treatment (UTT) in corporation tax, VAT or income tax returns filed on or after 1 April 2022.  A large business will be required to notify HMRC of an uncertain tax position where it would obtain a tax advantage, taking in all taxes, as a result of applying the uncertain tax treatment which exceeds £5 million.

Although this is not, on the face of it, something that would affect many transactions in the sector, we have sought clarification from HMRC regarding the term "public bodies", which they had used in the draft legislation to describe certain entities which would be outside the scope of this legislation.  We will wait to see whether the public bodies exclusion will extend to NHS subsidiaries for example, but early indications from HMRC suggest that subsidiaries may fall within the scope of the UTT legislation.

We will keep you updated as we receive additional information across all of these measures.

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If you would like to discuss any of these points, please do not hesitate to contact your usual KPMG contact, or one of the following:


Corporate Tax:         

Simon Robinson          (0782 5682 425)

Joanne Kitwood           (0776 9750 858)



Steve Brooks              (0207 896 4295/ 07957 228 941)

Arran Thoma               (0161 246 4596 / 0779 9726 142) or

Andy Pick                     (0117 905 4462 / 0782 449 8505)

Employment Tax:     

Paul Moreels                (0191 401 3703)

Anne-Marie Boden       (0207 694 2626 / 07917 403 625)