The health care exemption applies to the supply of services made by a medical practitioner that is on a register that is recognised by HMRC and the supply is that of services related to the care, protection or maintenance of the patients health.


HMRC have attacked a number of medical practioners who supply their services via limited companies to private health care providers, agencies and the NHS on the basis that the company is not providing a supply of VAT exempt health care, but instead is simply providing a supply of “staff”. This stance understandably causes concern for medical practitioners that make supplies via Limited companies and who simply cannot understand why VAT exemption does not apply given that they are registered medical practitioners and clearly employed to care for patients.


The recent decision in the case of Archus Trading Limited challenges the view that the public notice can be relied upon in this respect.  Archus is a business that tendered for and won a contract to provide medical care to the Ayrshire and Arran Health Board (the board) within prisons. HMRC ruled that it should account for VAT on its supplies as the contract between the two parties stated that it was the responsibility of the Board to provide the medical care and not the Appellant.


The decision was upheld during an independent review by HMRC on the basis that:


The obligation is on the Board to provide healthcare to the inmates of HMP Kilmarnock and the contract between the Board and the Appellant outlines how this will be delivered, i.e. by NHS staff and by the Appellant; and 

The contract provides that the Appellant is engaged in “providing staff to the NHS so that the NHS can meet their obligations in relation to the healthcare of inmates of HMP Kilmarnock”.


This supported the supply being that of staff per HMRC’s public notices 701/57 and 734 staff.


However, the tribunal chairman took the more sensible approach of reviewing how Archus actually operated in practice and sought to identify who was responsible for the provision of care to the patients that it treated.  The chairman determined that Archus was fully responsible for the provision of medical care as it doctors operated autonomously  when providing care with no direction or supervision by the board. It had in the tribunal chairman’s words:


“a free hand to decide what the GPs do, how they do it and when, and that is very clearly borne out… If the Appellant supplied staff only, then… the Appellant’s responsibility would stop at the prison gate. It most certainly did not. “


HMRC tried to counter this by arguing that it was the individual GPS who acted autonomously but the tribunal chairman rejected this view on the basis that the GP’s had a degree of autonomy in their day to day work but Archus was the party that decided on ways of working, training requirements, the provision of locums and all disciplinary matters.


The tribunal chairman therefore accepted  that Archus worked on a collaborative basis with the Board  but that ultimately the direction and control of the GPs, and the locums, rested at all material times with Archus and therefore HMRC’s guidance was not relevant.  The supplies made by Archus qualified for VAT exemption.


If you act for any medical practitioners making supplies to other entities it is worth considering if they meet the criteria for exemption or not.  The fact that they are a medical practitioner does not necessarily mean that exemption will apply, the VAT status of their supplies will, as in the Archus case, be determined by a number of factors.  If you have any doubt on the VAT treatment of your own or your client’s supplies it would be sensible to speak to your usual VAT advisor or call our free VAT helpline for a no obligation initial discussion.

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