What is your business?

Accurate VAT compliance is essential to every business, but with the many grey areas, what appears straightforward often is not and the starting point is to identify what supplies you are making.


The NHS is spending more than £5billion a year on agency staff. Agencies supplying staff are making supplies subject to VAT at 20%. Alternatively, consultants, specialists, GPs and other medical professionals make supplies of their skills which can fall within Schedule 9 Group 7 of the VAT Act and as such are exempt from VAT.


However, when medical staff, for example locum GPs, are provided by a company to the NHS, is that company providing a medical service which meets the requirements of the VAT exemption or are they providing standard rated staff? In addition, are the locum GPs, in this example, also correctly identifying their supplies to that company and applying VAT accordingly?


HMRC tried to clarify the position with a Business Brief in 2010, the Moher case revisited this in 2012 and a further case (Rapid Sequence Ltd) was taken to First Tribunal in 2013. The Rapid Sequence case identified that the exemption framed in UK VAT legislation goes beyond the scope of the EU Principal VAT Directive, and so that case further clarified the exemption requirements.


The recent City Fresh Services Ltd case (heard 16.6.15 released 21.7.15) reflects the exemption being confirmed against an HMRC challenge, although the win is a First tier tribunal and may be taken to Upper Tribunal.


So, for accurate VAT compliance it is essential to check that where VAT is being charged it is being charged correctly and where the exemption has been taken to apply that it is correct in the light of Rapid Sequence. This is especially relevant if the turnover (fees charged) in a twelve month period for such locum services exceed the relevant VAT registration threshold: £82000 currently.


If you would like to find out more on the topic, please contact Carol Watters on 01772 821021.