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HMRC have now issued Revenue and Customs Brief 11 2021 addressing the vexed question of the VAT liability of coronavirus covid-19 testing-services.

This has been a contentious area throughout the pandemic as services provided by medical professionals on a recognised medical register are exempt from VAT but only where:

  • the services are within the scope of the practitioner’s area of practice and
  • are intended for the protection, restoration or maintance of a person’s health.

The same logic applies to services provided by staff supervised by a registered medical practitioner and those provided by a hospital or state regulated institution.  That is the primary motive of the supply must be to care for a person’s health.

This has created a real headache for providers of covid tests who might qualify for exemption on the basis of being a registered medical practitioner or a state regulated institution but are delivering tests intended for purposes such as being fit to fly.

The reason being that the primary purpose could well be interpreted as allowing someone to go on holiday rather than to protect their health. This was previously understood to be HMRC’s stance on the treatment, which was also supported by the health care VAT exemption being aimed at the provision of a care service to the individual rather than services provided for the greater good of the population.

HMRC have now stated that their view is that the primary motive of care can also mean protection of human health which is now taken to mean both protecting the individuals being tested and also protecting others from infection. The exemption applies to tests taken for international air flights but only provided that all the other criteria are met to allow exemption to apply.

As with most VAT issues there are several caveats that could prevent exemption from applying, for example HMRC do not accept accreditation by UKAS (UK Accreditation Service) or CQC regulation that is specifically for covid as meaning a supplier is state regulated.  Also self-administered tests remain standard rated.

If you or your client supplies covid testing services, it would be worth contacting our helpine for an initial conversation with a view to identifying if you can recover VAT on past supplies or alternatively have a potential VAT exposure.

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