VAT Liabilities – An Introduction To The Understanding of The Correct VAT Liability

As a result of the judgement of the European Court of Justice in the case brought by Dr D’Ambrumenil in November 2003, HMRC had to change the VAT liabilities of various “non-therapeutic” services supplied by doctors with effect from 1st May 2007. The court had ruled that the exemption from VAT for supplies by medical practitioners could only apply to services where the principal purpose was to protect, maintain or restore the health of the individual.

Since 2007, the medical VAT exemption no longer applies to certain “non-therapeutic” reports, whose principal purpose is to enable a third party to make a decision, for example in respect of claims for compensation, benefits, or expert witness reports for the court (even if the case concerns the well-being of an individual), because the principal purpose of the report is to enable the court to take a decision. Such services are subject to VAT and if a medical practitioner has VATable income in excess of £83,000 they will need to become registered for VAT and charge VAT on such supplies.

Other reports that have become subject to VAT since 2007 include benefits agency reports, pre- employment medicals, and certificates concerning the fitness of a person to take up a particular profession or sporting activity, or to qualify for an HGV or flying licence, or a shotgun licence.

However where a report is provided to an employer concerning an employee’s fitness to work (sick note) or their fitness to carry out certain duties, this is exempt from VAT as its primary purpose is to protect, maintain or restore the health of the employee.

Some reports, whilst not exempt under the medical exemption, are still exempt under other parts of the VAT legislation, and these include reports to insurance companies in connection with the setting up of insurance policies or the handling of an insurance claim. Similarly, exemption is applicable to cremation certificates and education and training supplied by a self-employed doctor.

This is a very brief introduction to a very complex area of VAT liability and a more detailed article is planned for a later edition.

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