Date of issue: 19th April 2007

CHANGES TO VAT ON MEDICAL SERVICES

Independent chartered accountants Clement Keys are reminding health professionals that the VAT treatment of certain supplies will change with effect from 1 May 2007.

Following protracted litigation with Dr Peter D'Ambrumenil and Dispute Resolution Limited, HM Revenue & Customs has accepted the decision by the European Court of Justice which held that certain medical services should be treated as taxable.

Core NHS services and those connected with patient care and treatment remain exempt from VAT because they are 'intended principally to protect (including maintain or restore) the health of an individual'.

However, those medical services which are intended to enable a third party to take a decision will be considered taxable supplies. They will therefore be subject to VAT at 17.5% where practitioners are registered for VAT.

The services which are to be treated as taxable include, medical legal work, occupational health - pre-employment medicals, witness testimony and allowances and medical services linked to the valuation of insurance policies for tax purposes.

Medical services related to the setting up of insurance policies and the handling of claims remain exempt from VAT along with health screening which is part of a private health
insurance policy.

"Practitioners will need to monitor the levels of taxable services they provide, particularly if they are in a partnership, to ensure they apply for VAT registration at the correct time," advises director of Indirect Tax Services Steven Simmonds.

In the Budget the Chancellor increased the VAT registration threshold from £61,000 to £64,000 from 1 April 2007.

Clement Keys advises healthcare professionals to review VAT Notice 701/57 Health Professionals (January 2007) for more detailed information regarding the VAT treatment of the various medical services which are now considered to be taxable supplies or to consult their tax adviser.