Changes to the exemption for medical services from 05-07
01-01-2007
HM Revenue & Customs have just issued their long awaited guidance setting out changes to the VAT treatment of medical services.
These changes will come into effect on 1 May 2007 and result from a review undertaken by HMRC following the European Court of Justice decision in the Dr Peter d’Ambrumenil case. This case concerned the VAT treatment of services provided by registered health professionals and the ECJ ruled that the exemption for medical services should be restricted to services of “medical care”, i.e. those services which are intended principally to protect, maintain or restore the health of an individual.
As a result of the new rules the following services will become liable to VAT at the standard rate of 17.5% with effect from 1 May 2007:
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Witness testimony/reports for litigation, compensation or benefit purposes
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Reports/medicals for the purpose of providing certain fitness certificates
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Some occupational health services
These changes will mean that NHS bodies and General Practitioners who are already registered for VAT will have to review the supplies which they make and ensure that VAT is charged on relevant supplies after 1 May 2007.
The following are some examples of services which will become liable to VAT under the new rules:
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Provision of certificates and reports which enable a third party to make a decision and which do not contain any element of therapeutic care
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Fitness certificates proved as a condition of someone taking up a particular profession or sporting activity
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Pre-employment medicals
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Occupational health risk assessments and advice on workplace layouts
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Expert witness statements
Some services provided by NHS bodies and General Practitioners may be exempt from VAT under different VAT rules, e.g. the provision of education and training will be exempt when provided by an NHS body or a General Practitioner acting in a sole proprietor or partnership capacity.
Where additional taxable supplies are made it may be possible to increase the level of recovery of VAT on costs associated with these services.
It is important to remember that most medical services provided by NHS bodies and registered health professionals will remain either outside the scope of VAT (NHS healthcare) or exempt from VAT when provided by General Practitioners and other independent healthcare providers.