Firms selling UK travellers Covid tests not charging VAT - investigation

Companies offering Covid tests to travellers may be skewing the market by not charging VAT sales tax, a Guardian investigation has found, adding to pressure on the government to intervene and regulate pricing.

Guidance from the UK’s tax authority, HMRC, states Covid tests are only exempt from VAT, which amounts to 20% on the sale price, if administered by a registered health professional or if the company selling them has sales of less than £85,000 a year.

The Guardian has seen communications from a number of companies telling customers they have not been charged tax on home testing kits sent out by post.

One invoice for a Covid-19 self-testing kit from Eurofins, charged at £44.90, states that zero VAT has been charged.

Another invoice for a Covid-19 home testing kit from Expert Medicals provided to a UK resident says £0 taxes have been charged while Nationwide Pathology charged £40 for a day 2 PCR test with an invoice making clear no “sales tax” had been added.

Eurofins, Expert Medicals and Nationwide Pathology did not respond to requests for comment.

An executive at a testing company, who asked not to be identified, contacted the Guardian to raise concerns, saying they feared the decision by some providers not to add VAT might be distorting competition by allowing cheaper prices or bigger profits.

He said: “The legal and tax advice we were given was that we should be charging VAT, which we do and always have. When we see competitors potentially not charging VAT and undercutting us by so much it is very frustrating.”

HMRC guidance suggests that only tests administered in person by a health professional, for example, when attending a clinic or via a home visit, are exempt from VAT.

But there are questions over whether having self-administered tests analysed by a health professional would qualify the product for exemption from VAT, and the industry executive said some providers may be using this as a loophole to avoid the sales tax.

In a statement, the tax office said: “VAT is a broad-based tax on consumption and the standard rate of 20% normally applies to most goods and services, including PCR tests. However, medical testing administered by registered health professionals is exempt from VAT.”

“We have recently received queries about the application to Covid testing – as with all guidance, if clarification is required we will make the necessary amendments.”

Providers are calling on HMRC to either scrap VAT on the tests, or give more clarification to businesses and ensure everybody was charging tax correctly.

Avi Lasarow, European chief executive of Project Screen by Prenetics, a testing provider at Heathrow, Stansted, Southend and Luton Airports, said the company would welcome clarification from HMRC.

“We are charging VAT under accounting advice, but know other providers are not taking the same view, which makes for a potentially uneven playing field.

“Of course, our view is that government should, as policy, not be charging VAT on what is effectively an essential medical service in the national interest. Spain, France, Greece, Portugal, Cyprus and Ireland don’t tax holiday Covid tests and we should do the same.”

Ben Bradshaw, a Labour MP who sits on parliament’s transport select committee said: “The UK’s testing regime for travel is a total mess. The Guardian revelation shows there is no consistency in the charging of VAT, a significant part of the price. No VAT is levied in the rest of Europe and some countries provide tests completely free of charge.

“The UK government should scrap VAT on all Covid tests immediately. They are pricing families out of travelling to see loved ones they have been separated from for two years or more and needlessly destroying jobs in our transport and travel industries while the rest of Europe and America are well on the road to recovery.”

Bradshaw’s comment comes after a group of senior Conservative party MPs called on the government to cap Covid test prices at £40. Henry Smith, the Tory chairman of the all-party future of aviation group said the government should also scrap them for holidaymakers returning from “low-risk” countries.

“The rationale for the testing regime looks increasingly dubious. Why not, instead, sample a random group of arrivals rather than require everyone to pay for tests frequently run by shoddy companies failing to deliver tests on time and guilty of making hugely misleading price claims?” he wrote in The Telegraph.

A Guardian analysis suggested that air passengers to the UK had spent more than £500m on PCR Covid-19 tests from private companies since mid-May, only for the NHS to be saddled with extra costs when firms fail to deliver them.