The healthcare industry is coming under increasing pressure to add value, while being forced to reduce costs. In spite of this, it is important that businesses in this sector are protected from complex VAT rules surrounding the industry.
The basic rule states that healthcare services are exempt when the following conditions have been met:
1. The services are within the profession in which health professionals are registered to practice. This rule states that professionals must be enrolled or registered on the appropriate statutory register.
2. The primary purpose of the services is the protection, maintenance or restoration of the health of an individual.
It is important to note that therapists who are not registered under any statutory register (most notably acupuncturists and psychotherapists) are unable to exempt their services.
The UK has seen a boom in the number of businesses supplying health care professionals. It is therefore important that we are aware of the VAT rules surrounding these companies.
The general rule states that if a worker supplied by a business comes under the direction and control of the client, this is a taxable supply of staff and not an exempt supply of healthcare. If the employment business maintains the direction and control of the health professional staff to make a supply of medical care directly to the patient, then the employment business is making an exempt supply of health services. It is therefore important to note who is providing the healthcare to the patient.
Although businesses will want to set competitive prices by making exempt supplies, it is important that they proceed with caution in this difficult area.
