The Government has suffered a defeat in the Lords over its controversial health care reforms.
Peers voted by 195 to 183, majority 12, to require the Health Secretary to report on the VAT treatment of supplies by charities providing health care services for the NHS.
It was the first defeat inflicted on ministers during the Health and Social Care Bill's marathon 14-day report stage.
Moving the amendment to the Bill, Labour's Lord Patel of Bradford warned of "major inequality" over irrecoverable VAT for charities providing health care services.
He said that while the NHS was able to recover VAT on certain supplies, charities were not. And when services were transferred from the NHS to the charitable sector there was a "VAT gap" that had to be filled by charitable funds.
Lord Patel cited the example of a Sue Ryder hospice which incurred £44,000 in VAT each year, but if it was run by the NHS, he said, it would be able to recover 57% of the money.
Describing the present position as "untenable", he said the situation had been made worse by the rise in VAT to 20%.
"We shouldn't expect the charitable sector.... to subsidise care that everyone agrees is vital. We are asking them to not only continue to provide these services but add insult to injury by saying they should do so without the tax benefits available to the NHS."
Lord Patel said the need for action is even more urgent given the scope for additional health care services to be taken on by the charitable sector under the Bill.
Health minister Earl Howe assured peers the issue is firmly on the Government's agenda. He agreed that tax treatment is a "potential barrier" to the voluntary sector, which played a vital role in providing health care services. Treasury officials are already working with representatives from the voluntary sector to "explore" the VAT treatment of charities supplying the NHS, he said.