Implementation of VAT on Some GP Medical Services

Implementation of VAT on some GP medical services
All practices should now contact their accountant for advice on registering for VAT

·  See http://www.bma.org.uk/ap.nsf/Content/VATonmedicalservices

·  HM Revenue and Customs (HMRC) has announced the implementation of the VAT ruling on medical services.

·  This will take effect from 1 May 2007 (subject to House of Commons approval).

·  The European Court of Justice (ECJ) has recently ruled that the UK VAT exemption for medical services was too wide.

·  As a result, the UK is amending the exemption from VAT for health services with effect from 1 May 2007

·  Some GP services, currently exempt, will become liable to VAT at the standard rate.

·  If the principal purpose of the medical service is the protection, maintenance or restoration of the health of an individual then the services will continue to be exempt from VAT. Primary heath care provided through either the NHS or the private sector will remain VAT free.

·  However if the purpose of a medical examination or report is to enable a third party to decide a course of action the medical services will not be VAT exempt, but subject to VAT at 17.5%.

·  Therefore, medical practitioners registered on a statutory professional register whose taxable income (including VAT) exceeds the VAT registration threshold (Currently £61,000) will need to register for VAT.

·  They are advised to seek professional advice from a specialist medical accountant regarding the date when VAT must start being applied.

·  Medical practitioners who are already VAT registered, for example, as a result of dispensing changes which took effect on 1 April 2006, will need to ensure that they account for VAT as appropriate on any affected services from 1 May 2007.

·  HMRC has given the medical profession three months' notice to prepare for implementation on 1 May 2007. HMRC has prepared a guidance document on the effect of the ruling that is available on its website.

·  HMRC will shortly be issuing an information sheet giving advice on VAT registration and accounting issues for those affected by the changes.

·  Please note that there will be no compulsory back-dating of VAT registration before the implementation date

·  As well as the HMRC guidance the BMA Professional Fees Committee has prepared a FAQs document that will hopefully be useful in dealing with queries.

·  If members have questions of this nature (for example on claiming back input VAT) then they are advised to seek professional advice from a specialist medical accountant.
The BMA has issued a press release setting out its position on the implementation of VAT on medical services.

1st February 2007