Until recently it was accepted by tax advisers and HMRC that medical services which protected, maintained or restored a patient’s health were exempt from VAT.
However a tax case in 2013 altered this.
The case found that when a doctor worked through an employment business (say an agency) for a third party (say a hospital) and the third-party was LEGALLY responsible for providing the health care to the patient then the services provided by the doctor were subject to VAT at 20%.
The key factor in deciding whether medical services are subject to VAT would then appear to be deciding who is LEGALLY responsible for the provision of the medical care.
This is not an easy question to answer!
VAT registration threshold
Although the services of a doctor may be subject to VAT, the doctor will not need to register for, charge or account for VAT until the doctor services within a 12 month period exceed the VAT registration threshold. This is currently £85,000.
Getting this wrong could be costly!
If it turns out that you should have been charging and collecting VAT then HMRC can demand payment, even though you didn’t collect the money. These kind of cases can end up in court and are very serious.
How we can help
We can review your circumstances and establish whether you need to register for VAT.
If your circumstances are particularly complex we can refer you to a VAT specialist for expert guidance.
If you do need to register then we can assist with VAT registration and all the VAT administration.
We can advise you in relation to tax efficient VAT schemes which may advantageous if you’re forced to register.