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| US companies criticise UK healthcare firms' charitable status and tax breaks | US companies criticise UK healthcare firms' charitable status and tax breaks |
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| A former charities minister has called for an investigation into the public benefit of private healthcare operators being registered as charities and benefiting from tax advantages that brings. | A former charities minister has called for an investigation into the public benefit of private healthcare operators being registered as charities and benefiting from tax advantages that brings. |
| Labour MP Fiona Mactaggart, who was charities minister in the Blair government and is now a member of the Commons public accounts committee, called for the issue to be examined as new analysis by Cass Business School, showed how such operators benefit from tax advantages worth millions of pounds a year. | Labour MP Fiona Mactaggart, who was charities minister in the Blair government and is now a member of the Commons public accounts committee, called for the issue to be examined as new analysis by Cass Business School, showed how such operators benefit from tax advantages worth millions of pounds a year. |
| Among those is Nuffield Health, which describes itself as a social enterprise and which is a private hospitals group that has become Britain's leading provider of fitness and wellbeing facilities for corporate clients. | Among those is Nuffield Health, which describes itself as a social enterprise and which is a private hospitals group that has become Britain's leading provider of fitness and wellbeing facilities for corporate clients. |
| It pays its chief executive more than £850,000 a year and in 2011, the Cass research suggests, its charity status was worth almost £18m. | It pays its chief executive more than £850,000 a year and in 2011, the Cass research suggests, its charity status was worth almost £18m. |
| Mactaggart said: "I think it's a great pity that, because of feeble regulation by the Charity Commission, we are giving a significant bung from the taxpayer to organisations that appear to have few or, in some cases, none of what most of us would consider to be the usual characteristics of a charity." | Mactaggart said: "I think it's a great pity that, because of feeble regulation by the Charity Commission, we are giving a significant bung from the taxpayer to organisations that appear to have few or, in some cases, none of what most of us would consider to be the usual characteristics of a charity." |
| Nicola Robert, a co-author of the Cass report, however, said: "In general terms the tax policy-makers show little sign of discontent with the status quo on the grounds that charities do not operate to make profits for their shareholders and investors and where they do make profits, it is only to re-invest in more work for their causes and for public benefit." | Nicola Robert, a co-author of the Cass report, however, said: "In general terms the tax policy-makers show little sign of discontent with the status quo on the grounds that charities do not operate to make profits for their shareholders and investors and where they do make profits, it is only to re-invest in more work for their causes and for public benefit." |
| Nuffield Health, which nationally has 32 hospitals, 65 gyms and about 200 corporate fitness and wellbeing facilities, said it provided integrated "services to help people get healthy" which were a "core part of our charitable activities that provide our public benefit". | Nuffield Health, which nationally has 32 hospitals, 65 gyms and about 200 corporate fitness and wellbeing facilities, said it provided integrated "services to help people get healthy" which were a "core part of our charitable activities that provide our public benefit". |
| More than a third of the UK private healthcare sector is made up of charities, which must reinvest any profits they make. Most have enjoyed the status for many years: the London Clinic, which treated the Duke of Edinburgh for 11 days until he was discharged last Monday, has had charity status since 1935. | More than a third of the UK private healthcare sector is made up of charities, which must reinvest any profits they make. Most have enjoyed the status for many years: the London Clinic, which treated the Duke of Edinburgh for 11 days until he was discharged last Monday, has had charity status since 1935. |
| The Cass report assesses the tax benefits accruing to four charities: Nuffield, the London Clinic, the Hospital of St John & St Elizabeth and King Edward VII's, which is also in London and which is the usual hospital of choice for the royal family. | The Cass report assesses the tax benefits accruing to four charities: Nuffield, the London Clinic, the Hospital of St John & St Elizabeth and King Edward VII's, which is also in London and which is the usual hospital of choice for the royal family. |
| Taken together, the four are calculated to have benefited in 2011 by a total £31.2m. This comprises corporation tax relief of £9.9m, business tax relief of £3.2m and estimated VAT savings of £18.1m. | Taken together, the four are calculated to have benefited in 2011 by a total £31.2m. This comprises corporation tax relief of £9.9m, business tax relief of £3.2m and estimated VAT savings of £18.1m. |
| Nuffield is said to have benefited by £17.8m, the London Clinic £9.9m, St John & St Elizabeth £2.6m and King Edward VII £0.9m. | Nuffield is said to have benefited by £17.8m, the London Clinic £9.9m, St John & St Elizabeth £2.6m and King Edward VII £0.9m. |
| St John & St Elizabeth, which operates one hospital at its north London site, says it puts all its profits into its hospice, helping more than 2,000 terminally ill patients and their families every year. A spokesman for the hospital said: "The Hospital of St John & St Elizabeth has since its foundation in 1856 been a charity with the principle aim of serving the sick and the dying. | St John & St Elizabeth, which operates one hospital at its north London site, says it puts all its profits into its hospice, helping more than 2,000 terminally ill patients and their families every year. A spokesman for the hospital said: "The Hospital of St John & St Elizabeth has since its foundation in 1856 been a charity with the principle aim of serving the sick and the dying. |
| "The charity carries out its charitable commitment in maintaining an on-site hospice, St John's, which cares for a wide range of end of life patients both in its residential unit, its day centre and in the patient's home through its award winning Hospice@Home service. | "The charity carries out its charitable commitment in maintaining an on-site hospice, St John's, which cares for a wide range of end of life patients both in its residential unit, its day centre and in the patient's home through its award winning Hospice@Home service. |
| "Additional community services include the Lejeune Clinic, a centre for children with Down's syndrome, renal dialysis and a 45-bed dementia unit. | "Additional community services include the Lejeune Clinic, a centre for children with Down's syndrome, renal dialysis and a 45-bed dementia unit. |
| "All of these services are provided free of charge. Any surplus the hospital makes on an annual basis is fully reinvested into the charity so that these public benefit services can continue to be provided. | "All of these services are provided free of charge. Any surplus the hospital makes on an annual basis is fully reinvested into the charity so that these public benefit services can continue to be provided. |
| "We have to fundraise £1.5m a-year to keep providing these vital free community services and if it were not for our charitable status these vital services would not continue." | "We have to fundraise £1.5m a-year to keep providing these vital free community services and if it were not for our charitable status these vital services would not continue." |
| One-off tax breaks can be substantial, the report points out. Because medical equipment is zero-rated for VAT for a charity, there could be a saving of as much as £400,000 on purchase of a state-of-the-art scanner costing £2m. | One-off tax breaks can be substantial, the report points out. Because medical equipment is zero-rated for VAT for a charity, there could be a saving of as much as £400,000 on purchase of a state-of-the-art scanner costing £2m. |
| The research was commissioned by the American healthcare provider HCA, which operates six private hospitals in London but does not have charity status. It claims its main rivals in the capital have a clear commercial advantage and it wants the Competition Commission to address the issue in its current, nation-wide investigation into the private healthcare market, provisional findings of which are due next month. | The research was commissioned by the American healthcare provider HCA, which operates six private hospitals in London but does not have charity status. It claims its main rivals in the capital have a clear commercial advantage and it wants the Competition Commission to address the issue in its current, nation-wide investigation into the private healthcare market, provisional findings of which are due next month. |
| Keith Biddlestone, HCA's group commercial director, said his company paid about £75m annually in UK tax – about £50m more than it would pay if it was a charity like its rivals. | Keith Biddlestone, HCA's group commercial director, said his company paid about £75m annually in UK tax – about £50m more than it would pay if it was a charity like its rivals. |
| "The issue for us is that they can be more competitive on price. The London Clinic competes directly with our Wellington hospital, for instance. The issue for the government is that this is surely a relatively painless change it could make to the tax system," he said. | "The issue for us is that they can be more competitive on price. The London Clinic competes directly with our Wellington hospital, for instance. The issue for the government is that this is surely a relatively painless change it could make to the tax system," he said. |
| History suggests this may not be so. Argument over threats to the charity status of private schools, in the wake of introduction of the "public benefit" test in the Charities Act 2006, was far from painless. | History suggests this may not be so. Argument over threats to the charity status of private schools, in the wake of introduction of the "public benefit" test in the Charities Act 2006, was far from painless. |
| In 2011, a tribunal ruling appeared to have settled the controversy when it held that in order to satisfy the public benefit test, it was for the trustees of fee-charging charities – not the Charity Commission or the courts – to determine how much assistance (above a minimal or token amount) should be provided those unable to afford their fees. | In 2011, a tribunal ruling appeared to have settled the controversy when it held that in order to satisfy the public benefit test, it was for the trustees of fee-charging charities – not the Charity Commission or the courts – to determine how much assistance (above a minimal or token amount) should be provided those unable to afford their fees. |
| St John & St Elizabeth says it puts all its profits into its hospice, helping more than 2,000 terminally ill patients and their families every year. | St John & St Elizabeth says it puts all its profits into its hospice, helping more than 2,000 terminally ill patients and their families every year. |
| The London Clinic and King Edward VII both offer a 20% discount on their care fees to service and former service personnel and their families. King Edward VII also runs a benevolent fund to underwrite discretionary free care for those unable to afford to make a contribution. | The London Clinic and King Edward VII both offer a 20% discount on their care fees to service and former service personnel and their families. King Edward VII also runs a benevolent fund to underwrite discretionary free care for those unable to afford to make a contribution. |
| Nuffield Heath said: "Since acquisition, the health and wellbeing centres have been run as part of the charity helping us to deliver our strategy of integrated healthcare. | Nuffield Heath said: "Since acquisition, the health and wellbeing centres have been run as part of the charity helping us to deliver our strategy of integrated healthcare. |
| "We have moved them away from traditional fitness clubs and instead incorporated clinics, health assessments … and free public health education activities to fulfil our charitable ambitions at preventing ill-health and improving health and wellbeing." | "We have moved them away from traditional fitness clubs and instead incorporated clinics, health assessments … and free public health education activities to fulfil our charitable ambitions at preventing ill-health and improving health and wellbeing." |
| It added: "The 65 health and wellbeing centres all operate alongside our diagnostic and treatment activities that are based in our hospitals and therefore they are a core part of our charitable activities that provide our public benefit. | It added: "The 65 health and wellbeing centres all operate alongside our diagnostic and treatment activities that are based in our hospitals and therefore they are a core part of our charitable activities that provide our public benefit. |
| "The report from the Hospital Corporation of America seems to be trying to insinuate that UK charities like Nuffield Health put less back into society than for-profit corporations like themselves." | "The report from the Hospital Corporation of America seems to be trying to insinuate that UK charities like Nuffield Health put less back into society than for-profit corporations like themselves." |
| A spokesperson for Nuffield Health also questioned why HCA had chosen to "highlight their issues now" while the Competition Commission's investigations into private healthcare in London were ongoing. "It seems rather disingenuous that they are attempting to justify high prices, high profits and possible London dominance by undermining a group of UK charities who do not work to make a profit and thus sit in a different tax regime. | A spokesperson for Nuffield Health also questioned why HCA had chosen to "highlight their issues now" while the Competition Commission's investigations into private healthcare in London were ongoing. "It seems rather disingenuous that they are attempting to justify high prices, high profits and possible London dominance by undermining a group of UK charities who do not work to make a profit and thus sit in a different tax regime. |
| "In fact it should be noted that this, HCAs own report, even concluded that while the purpose of this research was to identify objectively the advantages of charitable status for private hospitals … charities do not operate to earn profits for their shareholders and investors and where they do make profits, it is only to re-invest in more work for their causes and for public benefit." | "In fact it should be noted that this, HCAs own report, even concluded that while the purpose of this research was to identify objectively the advantages of charitable status for private hospitals … charities do not operate to earn profits for their shareholders and investors and where they do make profits, it is only to re-invest in more work for their causes and for public benefit." |
| In 2011, Nuffield had a turnover of £575m and paid its group chief executive, David Mobbs, at least £850,000. Its then chairman received £49,000 and seven other governors shared £145,000. | In 2011, Nuffield had a turnover of £575m and paid its group chief executive, David Mobbs, at least £850,000. Its then chairman received £49,000 and seven other governors shared £145,000. |
| The Charity Commission, which ran a series of assessments of the public benefit of different types of charity between 2008 and the 2011 tribunal, admitted it had not done so in respect of any private healthcare organisations. But a spokeswoman said it had "no broad concerns" about their work. | The Charity Commission, which ran a series of assessments of the public benefit of different types of charity between 2008 and the 2011 tribunal, admitted it had not done so in respect of any private healthcare organisations. But a spokeswoman said it had "no broad concerns" about their work. |
| Charity legislation | Charity legislation |
| Legislation governing charities is "critically flawed" in not having defined the public benefit that all charities must provide to justify their privileges, MPs have said. | Legislation governing charities is "critically flawed" in not having defined the public benefit that all charities must provide to justify their privileges, MPs have said. |
| The Charities Act 2006 placed the Charity Commission in an impossible position by failing to indicate what was an acceptable level and nature of public benefit, the Commons public administration select committee concluded last month in post-legislative scrutiny of the measure. | The Charities Act 2006 placed the Charity Commission in an impossible position by failing to indicate what was an acceptable level and nature of public benefit, the Commons public administration select committee concluded last month in post-legislative scrutiny of the measure. |
| It was "essential for parliament to revisit this legislation and set the criteria for charitable status rather than delegating such decisions to the Charity Commission and the courts", the committee said. | It was "essential for parliament to revisit this legislation and set the criteria for charitable status rather than delegating such decisions to the Charity Commission and the courts", the committee said. |
| According to leading charity lawyer Lord Phillips, however, this is highly unlikely to happen in the foreseeable future. He says there is little appetite among politicians for reopening such a thorny issue and breaking the impasse left by the 2011 upper tribunal ruling against the commission's attempts to define public benefit. | According to leading charity lawyer Lord Phillips, however, this is highly unlikely to happen in the foreseeable future. He says there is little appetite among politicians for reopening such a thorny issue and breaking the impasse left by the 2011 upper tribunal ruling against the commission's attempts to define public benefit. |
| Phillips sought unsuccessfully to tighten the act when it was passing through parliament and he remains sharply critical of its silence on the nature of public benefit. | Phillips sought unsuccessfully to tighten the act when it was passing through parliament and he remains sharply critical of its silence on the nature of public benefit. |
| "It sticks in the gullet of people that a hospital or a school that has charges which only the rich can afford should enjoy the benefits of charitable status, particularly tax benefits," he said. "But it's always been a vexed issue and there is no easy answer." | "It sticks in the gullet of people that a hospital or a school that has charges which only the rich can afford should enjoy the benefits of charitable status, particularly tax benefits," he said. "But it's always been a vexed issue and there is no easy answer." |
| • This article was amended on 20 June 2013 to add a more extensive response from Nuffield Health. It was further amended on 21 June 2013 to include a response from St John & Elizabeth. | • This article was amended on 20 June 2013 to add a more extensive response from Nuffield Health. It was further amended on 21 June 2013 to include a response from St John & Elizabeth. |
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