US companies criticise UK healthcare firms' charitable status and tax breaks A flyer for the St John's hospice summer fair recently dropped on doormats across north London. The top half of the leaflet advertised the bouncy castle and candyfloss; the bottom half promoted Casualty First - "your private walk-in urgent care centre." Both the hospice and walk-in centre are parts of the Hospital of St John & St Elizabeth, a private healthcare operator that is also a registered charity. According to a new analysis by experts at Cass Business School, such operators are benefiting from tax advantages worth millions of pounds a year. Nuffield Health, which describes itself as a social enterprise, 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. In 2011, the Cass research suggests, its charity status was worth almost £18m. Labour MP Fiona Mactaggart, who was charities minister in the Blair government and is now a member of the Commons public accounts committee, is calling for an investigation into the public benefit Nuffield and other private healthcare charities are providing in return for their tax breaks. " 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. 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 on 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 Sister Agnes, 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. Nuffield is said to have benefited by £17.8m, the London Clinic by £9.9m, St John & St Elizabeth by £2.6m and King Edward VII by £0.9m. 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. St John & St Elizabeth said in its annual report for 2011 that it had become the first UK private hospital to buy a particular type of MRI scanner, operation of which had "led to a significant growth in MRI volumes." The research was commissioned by American healthcare provider HCA, which operates six leading private hospitals in London but does not have charity status. It says its rivals have a clear commercial advantage and it wants the Competition Commission to address the issue in its current 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 - some £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. 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. 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 ex-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, which has 32 hospitals, 65 gyms and some 200 corporate fitness and wellbeing facilities, says: "To meet our charitable aims we provide services to help people get healthy and stay healthy, to understand and manage their personal health risks, and to get timely diagnosis and treatment for any problems which arise." 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. Nicola Robert, a co-author of the Cass report, which has not been published, said that "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."