Value Added Tax is a levy applied to most products and services. It is a complex tax, but for many businesses it is part of the day-to-day finances. VAT is charged on invoices and recovered on certain costs incurred.
There are special provisions within the VAT legislation specific to medical services, but reviewing and evidencing that those exemptions apply is extremely important. Alec James gives some wise advice.
Generally speaking, VAT is not on the radar of many doctors. The reason is that there is an exemption which covers the majority of your work in the private sector.
There is detailed HM Revenue and Customs (HMRC) guidance regarding VAT for medics, referred to as VAT notice 701/57.
Fundamentally, where your income meets the following two requirements, the income is deemed to be exempt from VAT and therefore your business has no VAT obligations:
1 The services are within the profession in which you are registered to practice;
2The primary purpose of the services is the protection, maintenance or restoration of the health of the person concerned.
As registered doctors providing medical care to patients, your private practice income would usually pass these two tests and therefore is exempt from VAT.
This means you are not required to charge the current VAT rate of 20% on your invoices.
Where an income stream does not meet the two requirements for VAT exemption, you need to consider your VAT position, because the income will be considered to be a ‘VAT-able supply’ – or ‘standard-rated’ as it is formally known. More...