When doctors need to charge VAT

VAT May 20, 2014

Medical services are VAT exempt in the UK. Which means that a locum doctor providing medical services either as a sole trader or a limited company typically will not charge VAT. However, if an agency is involved, i.e. the doctor provides services to the agency which in turns bills the hospital, then both services (between the doctor and the agency and between the agency and the hospital) will attract standard rated VAT.

This is a new development and an important one. In the past such services would have been exempt but in 2011 new guidance from HMRC was published in Notice 701/57 classifying such services as employment services rather than medical services. Following that publication, Rapid Sequence Ltd, a company providing medical doctors challenged HMRC in court. Unfortunately, the First Tier Tribunal (Rapid Sequence Ltd v. HMRC - Aug 2013) found for HMRC.

As a consequence, doctors need now pay attention to whom the invoice is for and if they want to avoid VAT registration, they need to either avoid agencies or arrange for payment of their services separately.


Franck Sidon

With over 15 years of experience as a Managing Director at TaxAssist Accountants, I have helped thousands of businesses and individuals achieve their financial goals and optimize their tax efficiency.