The burning issue – should VAT be removed from the price of sunscreen?

A number of high-profile charities are now pushing the government to remove VAT from the cost of high-factor sunscreens. Currently classified as a cosmetic product, over-the-counter purchase of sunscreen is subject to VAT at the 20% standard rate meaning one sixth of the cost of a bottle goes directly to the UK government. Given recent price increases of such products, combined with the addition of VAT, there does appear to be merit in asking the government to introduce a new VAT relief in order to encourage wider usage and help reduce the risk of skin cancers, like melanoma.

The government’s previous response (/defence) to similar calls used to be they were bound, under EU rules, to maintain the present VAT rates on UK goods and services. This argument generally no longer holds water post-Brexit. Whilst the UK is still bound to certain EU VAT principles, it does have the flexibility to introduce new reliefs under our zero rate VAT relief provisions. 

VAT is estimated to have brought in a ginormous £160 billion of revenue in the tax year 2022-23. Since Brexit, we understand there have been requests made to the government for new VAT reliefs to the tune of £50 billion, the majority of which are likely to be for very worthy causes. Without increasing tax in other areas, granting all these requests would appear to be financially untenable. 

It should be recognised tax can be a very effective tool for driving consumer behaviour and there may be financial logic in granting the sunscreen relief by comparing the potential tax saved in paying for reduced cancer treatments. It is estimated the cost to the NHS of treating skin cancer may grow to a whopping £465 million by 2025. By comparison, revenues of sunscreen in the UK are estimated to be in the region of £335 million meaning the VAT collected could be up to £67 million. Whilst sunscreen is proven to provide excellent protection, skin cancer will unfortunately still exist even with increased use of the product. But, one would logically expect the NHS spend on skin cancer treatments to reduce were there greater usage of sunscreen. Even a reduction to the NHS budget, say of around one seventh, as a result of greater sunscreen usage may pay for itself. 

This does assume high street shops would pass on the VAT relief benefit which, past experience, tells us isn’t always the case. This is the key challenge and a difficult issue to solve. There have been similar campaigns in the past, such as on the ‘tampon tax’, and it remains far from clear that a VAT saving was passed on to consumers. If a ‘suncream saving’ was introduced, it would be difficult to monitor whether it was being passed on without more transparency from retailers of their pricing and profit data from the products. Perhaps one solution to explore would be to require retailers to provide a retail voucher to customers equivalent to the VAT saving. Retailers could still of course seek to increase their pricing by 20% and it may still be necessary to track the pricing data of major retailers to monitor that. Ultimately, any solution needs to ensure the administrative burden on HMRC is not substantially increased as that is something it can ill-afford.

On the face of it, there may be a good economic argument for the introduction of a new VAT relief for high-factor sunscreens. Add in any mitigation to the personal trauma often caused by the condition, this could be one campaign the government should seriously consider. However, given the scepticism that shops may fail to pass on new tax savings to the general public, any new relief may need to be matched by a public commitment from the major retailers they will do the honourable thing and ensure the financial benefit is passed through. If charities can secure these promises then the government may well act on this campaign.