Charitable status helped to save four leading private hospitals more than £30m in taxes in 2011, according to a report by the Cass Business School’s Centre for Charity Effectiveness.
The report analysed publicly available data on King Edward VII’s Hospital, Nuffield Health, the Hospital of St John & St Elizabeth and the London Clinic, and examined the corporation tax, business rates and VAT that they paid.
The report was commissioned by Pielle Consulting on behalf of HCA International, a rival private hospital group that does not have charitable status.
It found that if the four private hospitals had not been entitled to corporation tax and business rate relief, they would have had to pay £13.1m in 2011. The researchers estimate that the London Clinic would have had to pay the most in corporation tax and business rates – £6.8m – followed by Nuffield Health on £4.9m.
The report says that the Exchequer lost out on a further £18.1m in VAT because of the four private hospitals’ charitable status.
By contrast, HCA International paid £33.4m in corporation tax and business rates and a further £23.6 in irrecoverable VAT.
In a statement, HCA said: "This independent research has shown that, as a result of their charitable status, these four hospitals/hospital groups alone benefited financially in 2011 to the tune of more than £30m in total. Nationally, this figure is probably higher if one takes into account other hospitals throughout the country that have charitable status, but function as private hospitals and compete in the private healthcare market."
HCA said that the market distortion this creates should be considered in the current review of the private healthcare market by the Competition Commission. It is due to report in April next year.
But Nuffield Health has accused HCA of using the study to distract from the Competition Commission inquiry.
In a statement, Nuffield said: "It should be questioned why HCA has chosen to highlight these issues now, especially at a time when it is trying to respond to a Competition Commission inquiry, where allegations have been made that it runs a monopoly in London.
"It seems rather disingenuous that it is attempting to justify high prices, high profits and possible London dominance by undermining a group of UK charities that do not work to make a profit and thus sit in a different tax regime."
The statement added: "The report seems to be trying to insinuate that UK charities such as Nuffield Health put less back into society than for-profit corporations like themselves. Everything we do at Nuffield Health is designed to improve the health of the UK population. This means, like every other charity in the UK, we operate under a separate tax regime than global for-profit organisations, who exist solely to provide a return to their shareholders."