HM Revenue & Customs has told the pharma industry it will pause enforcing VAT bills for supplying free medicines under early access schemes while the government considers what to do about a revolt over the tax.

The Times reported last month that Bayer, the German multinational, has stopped new patients receiving medicines under a scheme and another big pharma company was considering a similar move.

HM Revenue & Customs has been issuing VAT bills to pharma companies providing medicines at no cost to patients through post-clinical trial continuity of care or compassionate use schemes.

The schemes aim to give patients with life-threatening or seriously debilitating conditions early access to medicines that do not yet have marketing authorisation or NHS funding.

The industry is concerned the tax bills risk affecting the UK’s attractiveness for clinical trials, because companies may be less willing to run studies in the UK if they face additional VAT costs when maintaining treatment for patients after a trial ends.

The government is in discussions with the sector following the concerns and Treasury officials met bosses recently.

The industry has been informed by HMRC policy officials that, while it has an obligation to protect revenue, it understands the government is actively considering the issue and therefore HMRC will use its discretion to extend review periods or delay enforcing on decisions while those discussions take place. HMRC has not, though, changed its view of past tax liabilities.

A government source said HMRC is not “systemically” extending review periods but considering them on a caseby-case basis.

The pharma industry is seeking further clarity and urging the government to confirm that “clinically justified” free-of-charge supply should not trigger VAT liabilities.

Julia Lopez, the shadow science, innovation and technology secretary, had raised concerns with Liz Kendall, the secretary of state, in February, where she had said the “UK’s reputation as a home for clinical research is essential to our status as a life sciences superpower.

That reputation is now at risk.”

A letter this month from Lord Vallance, the science minister and a former executive at GSK, one of Britain’s two big drugs companies, told Lopez that the government “is aware of the issue you raise … and recognises the importance of patients across the UK having access to innovative medicines”.

A government spokesman said: “We fully recognise the importance of early access and compassionate use schemes and are fully committed to ensuring patients can continue to benefit from them.”

A government source said that there had been no recent changes to UK VAT policy.