Healthcare, training provision & VAT

The building blocks of medical care provision and VAT law

With certain exceptions, the provision of medical care is exempt from VAT and most providers of primary care, such as GP practices and GP Federations, will not be registered for VAT.

There are two common exceptions. A GP dispensing practice will be required to register for VAT in relation to the zero-rated provision of drugs by prescription. Larger GP practice partnerships may be required to register for VAT if the level of income earned which is subject to VAT exceeds the VAT registration threshold. This is currently £85,000 per year. HMRC guidance provides details of the VAT liability of income earned by GPs. As an illustration, examples of income subject to VAT in HMRC guidance include:

  • Periodic assessments required for car-parking badges for disabled schemes.
  • A medical to determine fitness to hold a standard driving/LGV/HGV licence.
  • Pre-employment medicals and reports.

The introduction of primary care networks (PCNs) in 2019 brought with it the need to understand the VAT consequences of employing and sharing additional roles (ARRS) within the PCN network of practices. That remains an issue, although the extent to which the current PCN structure will persist after 2024 is unclear, and so of course is the VAT outcome of any revised model to provide medical care.

Training, education, and assessments

In our experience, there are two areas of concern. First, the income earned by GP practices as a placement provider for medical students. Second, the income earned in the wider healthcare sector as a local or regional training hub (LTH or RTH).

The basic premise of the VAT system is that all income is subject to VAT unless there is a specific VAT relief or VAT exemption in place. As these are exceptions to the rule that VAT is due, they are strictly defined both by the law itself and in the guidance issued by HMRC.

There are detailed VAT rules designed to define and limit the scope of the VAT exemption for medical care. There are equally detailed rules which define and limit the scope of the VAT exemption for services provided within the education sector and more widely, those services which are linked to the provision of education.

In overview, the following education services are exempt from VAT:

  1. School, college, and university education.
  2. Private tuition.
  3. Vocational training funded by Department for Education (DfE).
  4. Education provided by a public body, or any entity precluded from distributing profits.
  5. Examination services.

We need to apply those definitions to primary care providers, such as GP practices. For point 1, a GP practice will not be a school, college, or university, as those institutions are defined in VAT law by reference to the Education Acts which govern their operation.

Point 2, a Partner in a GP practice can provide VAT exempt private tuition in a subject commonly taught in a school, college, or university. The VAT exemption would not though extend to staff employed by the practice.

Points 3 and 4, a GP practice does not receive DfE funding, it is not a public body, and it will not be precluded from distributing its profits.

We are therefore left with examination services in our search for an education VAT exemption for a GP practice.

Examination Services

The legal definition for VAT exempt examination services is:

“The setting and marking of examinations, the setting of educational or training standards, the making of assessments and other services provided with a view to ensuring educational and training standards are maintained.”

Health Education England (HEE) issued the following guidance on behalf of the Department of Health and Social Care (DHSC) on the VAT treatment of examination services in December 2022.

“The charge made by placement providers to HEE (or to a medical school where Education and Training Tariff funding has been devolved by HEE) has always been considered as a VAT Exempt charge. The exemption applied has been under Group 6 of Schedule 9 of the VAT Act 1994 as a provision of Examination Services. DHSC does not disagree with this VAT treatment.”

What does this mean for the GP practice?

DHSC considers that the legislative definition of the VAT exemption that applies to examination services aligns with “the charge made by placement providers to HEE (or to a medical school where Education and Training Tariff funding has been devolved by HEE)”.

Although we believe this is a reasonable view of the scope of the VAT exemption, unfortunately HMRC have declined to endorse this third-party opinion of VAT law and referred the author to their published VAT guidance. We are aware that rulings have been sought by individual GP practices and we hope that will provide further clarity.

Training hubs

We have already determined that a GP practice can only exempt its supplies of education or training based on the VAT exemption for examination services. It fails to satisfy the other criteria for VAT exemption. If a GP practice acts as an LTH or an RTH it may therefore have a VAT liability on the receipt of this income.

The same VAT restrictions may apply to GP Federations, PCN legal entities, or other independent provider organisations.

There may be other solutions, but these are not panaceas. Care should be taken to ensure that the following solutions are understood at all levels of the relationships between the NHS, the RTH, and the LTH.

If the RTH is established as a not for profit entity, such as a community interest company with appropriately drafted articles of association, its training hub income may be exempt from VAT.

Although this approach may allow the RTH to receive income from the NHS without the need to charge VAT, it will not address the VAT liability of funds passed from the RTH to the LTH.

If the LTH is a GP practice (or other for profit entity) it cannot receive this income without a liability to account for VAT unless the funds are not within the scope of VAT. In simple terms, can the receipt of LTH funds be treated as a grant paid by the RTH? If so, the LTH may be able to receive the funds without the need to charge VAT. Bear in mind that this solution can only be applied on a prospective basis, as it would need to be supported by suitable contractual arrangements and by the financial statements of both the RTH and the LTH.

What we observe in this article is the unhappy marriage of archaic VAT law with the modern practice of closer working between the NHS and primary care. There are solutions, but they must be used with caution to avoid unintended consequences.

Our corporate finance team advises Tristone Healthcare on latest acquisition

Our corporate finance team has advised Tristone Healthcare – the independent buy and build investment group – on another acquisition that extends its footprint in the social care sector.

The acquisition of South West Intervention Services Ltd (SWIS) – which is headquartered in Buckfastleigh – will broaden Tristone’s geographical reach, as well as adding new specialisms to the investor’s expanding portfolio.

The corporate finance team provided deal advisory, financial and tax due diligence to Tristone Healthcare on the transaction.

SWIS provides bespoke learning packages to young people who may be at risk of exclusion from education, as well as a variety of support services for vulnerable children and young people. These include intervention, emergency crisis, family support, supervised contact, and enabling activities.

The provider, which currently supports 120 individuals and employs 35 people across the region, works to re-engage children in education, with an emphasis on attaining their English, Maths and Science, while also strengthening their ability to manage behaviours.

Tristone founder and CEO, Yannis Loucopoulos, said:

“The acquisition of SWIS marks another significant strategic milestone for the business, as we look to strengthen our position in the social care sector. Not only does it add a new service stream to our portfolio, which will be mutually beneficial for all our children-focussed providers, but it also extends our reach in the South West, broadening our geographical footprint. 

“As with all businesses within our community, SWIS prides itself on delivering best in class social care services and achieving outstanding outcomes for the individuals in its care, making it a natural fit for our values-led proposition. At the same time, SWIS demonstrates all the hallmarks of a provider that has significant, long-term growth potential.”

Nikki Buckler and Becci Howie, who manage SWIS, will remain in the business as part of the deal. Nikki said:

“We’re delighted to be part of the Tristone Healthcare business community, as we strive collectively to improve and enrich the lives of vulnerable children and young people.

“With the expertise and support of Tristone, our aim is to achieve sustainable growth, while unlocking value within the business and ultimately helping more individuals who need support and education.”

Rob Holgate, associate director, added:

“We’re proud to have supported Tristone with another acquisition that will build social value and strengthen communities. This is a move that supports further growth and development of a great business that’s helping to achieve better outcomes for young people in the South West.”

Tristone Healthcare’s strategy is to acquire and build high-quality businesses with strong fundamentals, delivering outstanding care and support to vulnerable people who need it most. The team has quickly built a reputation in the market for its specialism to acquire and grow outstanding social care companies.

Healthcare Webinar: Financial and banking update for Primary Care Networks

Our recent webinar hosted by Healthcare Partner, Deborah Wood, Healthcare Client Manager, Matthew Hodgson and our experts at Lloyds Bank, covered the recent financial and banking updates PCNs need to currently be aware of.

The webinar covered the current and future of the PCN contract, ARRS and non-ARRS staff, NHS Pension Scheme Access, PCN bank accounts, practice funding for today and the 2023/24 GMS contract changes. You can watch the recording below.

If you require any information regarding the above please do not hesitate to contact our specialist Healthcare team today.

Financial and pension checks for GP partnerships

GP practices are increasingly beginning to feel the effects of both the cost-of-living crisis and the impact of the NHS Pension Scheme administration on their cash flow. 

To help give practices peace of mind, we have put together a list of steps you can take to make your life as a practice manager that little bit easier. 

Avoid large pension shortfalls becoming due each February

In March of each year, your GP practice must submit an Estimate of Pensionable Profits (EOPP) for the pension year ahead. 

Getting this as accurate as possible will ensure that your practice is not paying too much throughout the year, or that there won’t be large shortfalls to pay in the following February

If you follow the tips below, you will ensure that your practice isn’t left out of pocket throughout the year:

Disclosure of external practitioner earnings

If any of the partners or salaried GPs have other practitioner earnings from outside the practice, they will need to inform the preparer of the practice’s EOPP to ensure the tier rate that is used for the monthly pension contributions is as accurate as possible. 

This includes earnings such as SOLO income, freelance GP locum income (as recorded on forms A & B), bed fund income and income pensioned at other surgeries. 

Checking contract statements for partners and salaried GPs

Check the monthly contract statements on PCSE Online to confirm that the deductions for the Partners and salaried GPs match the monthly amounts calculated on the most recently submitted EOPP. 

The online EOPP form now shows the monthly employee contribution figure which can be useful for a quick check, but you should also be aware that some GPs might also have added years’ contributions or be paying for additional pension so please ensure you have this information available.

Reviewing EOPP names and pension contributions

Review all the names on the EOPP and confirm that they are appearing in the pension contributions section of your monthly contract statement. 

If someone is missing from the contract statement deductions, there will be a potential shortfall due by the year end when it comes time to calculate what they should have paid! 

Likewise, you want to check that deductions aren’t being taken for anyone who has opted out of the scheme or has since left the practice altogether. 

This will mean checking that your practice’s Performer List is up to date for any joiners or leavers from the practice, and that all relevant opt-in or opt-out forms are completed.

Resubmit EOPP throughout the year – if needed

You can re-submit Estimates of Pensionable Pay throughout the year if you expect that practice or individual profits will be higher or lower than were previously calculated.

Work with your accountant

 Your accountant will usually include a provision in the accounts for the pension shortfall or refund before the final certificates are prepared in February – plan ahead with the practice cash flow based on those provisional figures so that there are sufficient funds in the practice once they become due. 

Getting pension records up to date for GPs

Be conscious of the money that your practice might owe or be owed in relation to pension contributions. These could be due to historic balances on partner Type 1 certificates that haven’t been processed by PCSE, or where salaried GPs have not submitted their Type 2 pension certificates for previous years. 

We will look at both in more detail below:

  • Refunds from previous years’ certificates that haven’t been paid over to the practice are obvious wins for the practice’s cashflow, but it is also worth looking into why any historic shortfalls are still showing on the practice’s balance sheet. If they haven’t been collected, then there is a chance that the GPs’ pension records have not been updated by PCSE and NHS Pensions. A GP’s pension record will need to be kept up to date in order to accurately show their pension benefits on their Total Reward Statement.
  • Salaried GPs should have just submitted their 2021/22 Type 2 certificates to meet the 28 February deadline. Any over or underpayment that is calculated on the Type 2 certificate must be paid directly to/from the relevant employer practice on submission of the form. The practice should then make any appropriate adjustments to that employee’s payroll. Shortfalls and refunds for prior years should be identified separately on the payslips so that they do not form part of the current year contributions on their next Type 2 certificate in the following February.

PCSE will also make their own adjustments via the practice contract statement once they have processed the Type 2 certificate. 

This is a separate calculation, outside of the payroll, and may not be the same amount paid to or refunded from the practice by the GP. The adjustment through the contract by PCSE is between PCSE and the practice only and should not affect the salaried GP.

Making sure your practice is being properly paid for work undertaken

  • Each month, view the statements for your GMS/PMS contract and dispensing/prescribing income on the PCSE Online Portal. Are all the income streams you expected showing on there? And does the payment(s) that you received into the bank account match to the total net amount shown on the statement? Investigate any differences that you find.
  •  Check the data showing on the CQRS system each month to ensure activity is correctly recorded and that claims have been processed.  You should be able to track your activity to the income received on the monthly statements; payment is usually received one or two months in arrears of the claim month.
  • Make sure your practice’s Primary Care Network (PCN) bookkeeping records are kept up to date throughout the year and that information is handed over to the PCN’s accountant as soon as possible after the accounting period year end. This will enable them to calculate any potential surplus that your practice is due for PCN work done during the year but not yet distributed to the practice.

Compare the income paid to the practice on the PCN statements with what has been paid during the year to ensure that these match and are reflected in your practice year end accounts.

How can MHA help?

For more information, tips and advice please get in touch with our Healthcare Services team by filling in the form below.

A step-by-step guide to using your HMRC personal tax account

The implementation of Making Tax Digital (MTD) has once again been postponed by HM Revenue and Customs (HMRC), with the new commencement date now set for 6 April 2026.

Nevertheless, HMRC is actively advancing their digital capabilities in preparation for the launch, as demonstrated by the development of the personal tax account service. This service serves as a centralised platform for individuals to access all relevant HMRC-related information and resources.

How do you set up your personal tax account?

To access the service, you’ll be required to log in using your government gateway user ID and password. If you haven’t created these credentials yet, don’t worry as the process is relatively straightforward.

However, you’ll need to provide two forms of personal identification, in addition to either your national insurance number or postcode.

There are several acceptable forms of identification, such as:

  • A valid UK passport
  • Photocard driving license
  • A payslip from the last three months
  • A P60 from your employer from the previous tax year
  • Information from a self-assessment tax return

For financing purposes, you may require a copy of the SA302 tax calculation, included as part of your tax return, or the Tax Year Overview. These details can be downloaded directly from your personal tax account.

How can my personal tax account help me review my National Insurance record?

Your personal tax account can be particularly beneficial when it comes to reviewing your National Insurance record.

By accessing your personal tax account, you can easily review your complete National Insurance record, covering your entire working history.

This helps you to ensure that your record is entirely accurate and up to date and to identify any gaps in your contributions that may need to be addressed.

By doing so, you can ensure that you have the correct credits to receive a full pension when you reach the state pension age. If you do find any gaps or discrepancies, it’s best to contact HMRC for further investigation.

Can my personal tax account help me review my employment records?

With your personal tax account, you have the added benefit of being able to review your employment records. This allows you to check that the details recorded on your P60 agree with the details held in HMRC’s records.

Additionally, if you’re unable to obtain a copy of your P60 from your employer, you can access these details through your personal tax account. You can also review your in-year record to ensure that the information is accurate, as HMRC updates your records in line with submissions made by your employer.

Does my personal tax account provide information on PAYE codes?

Another useful feature of your personal tax account is the ability to view the PAYE codes that have been applied to your employments.

Moreover, you can directly modify your PAYE code through your personal tax account. This comes in handy if the amount of tax being collected at the source is not enough.

Changing your tax code can ensure that more tax is withheld at source, thereby spreading out your tax liabilities throughout the year. This approach can be more manageable than paying little tax throughout the year and facing a large tax liability when you file your tax return.

Other key benefits of a personal tax account

Your personal tax account also enables you to update HMRC with any changes to your child benefit circumstances, such as if your child stays or leaves education or training. You could also apply for a further 20 weeks if your child registers with their local careers service or Connexions.

If you are subject to the high-income child benefit charge, you can stop or resume your child benefit payments using your personal tax account.

Other useful services included as part of your personal tax account include being able to:

  • Check how much income tax you paid in the previous 5 years
  • Check and manage your tax credits
  • Check your state pension
  • Track tax forms that you’ve submitted online
  • The service also allows you to tell HMRC about a change of name or address
  • Details of your unique taxpayer reference (UTR) number and National Insurance number can also be found through your personal tax account.

This is just an overview of what services are available through your personal tax account. By utilising your personal tax account, you have multiple options available to interact with HMRC.

You can also arrange to receive HMRC correspondence through your personal tax account, which allows you to view messages and reduces the need for paper correspondence.

Creating your personal tax account provides you with the ability to monitor your tax affairs, ensuring that your records are up-to-date.

We are here to help

If you have any questions or concerns regarding the information above and how it may affect you, please do not hesitate to contact us using the form below.

Healthcare business year-end accounting – A guide to success

As the year-end rapidly approaches for businesses with a March year-end, it’s wise to stay ahead of the curve and be prepared for the email from your accountant.

One of the most challenging aspects of the accounts preparation process for accountants is identifying transactions that have been coded incorrectly and assisting with providing the necessary journals to correct the position.

This can also render your bookkeeping less useful for internal use or budgeting purposes.

To ensure a smoother year-end process, follow these 10 simple steps.

Run a general ledger export to excel from the reporting function in your bookkeeping software

Here you can scan through the transactions and easily highlight anything which is not in the correct heading.

This can then be easily amended in the software before the information is sent to your accountant.

Ensure any assets purchased have been recorded separately and are not hidden within repairs or general expenses headings

This will ensure a smoother process at year end and will avoid having to review expense headings to locate capital expenditure.

This is necessary to ensure the correct tax treatment is applied to the expense.

Ensure there are no categories where unknown transactions still need to be allocated

Allocation of transactions should happen at the reconciliation stage and these headings should be empty when accounts preparation starts.

Drugs and consumables split

Ensuring that only reimbursable drugs purchases are shown in drugs cost as including consumables or other non-reimbursable items will distort drugs profit margin results.

Stocktake

Ensuring a drugs stock is accurately taken at your year-end will enable the profit margin to be more accurate and meaningful

Income splitting

If you receive large amounts of NHS income from NHSE and the ICGs, it should be helpful if this is split down to detail the services provided and paid for, enabling better quality information for your practice forecasts and budgeting.

Ask your accountant about NHS statement uploads which can save time and improve the quality of your information.

PCSE tip

Ask your GPs to log on to PCSE for their annual pension (superannuation) deduction schedules, these will be needed for the annual pension certificate calculations and can only be obtained by the individual GPs themselves.

Debtors (owed to the business)

Keep a list of amounts owed for work done before the year end not yet paid for and provide this to your accountant to include in the accounts. Income must be included based on when it is earned not when it is received to meet HMRC requirements.

Consider using the aged debtor function on your software if you use the billing /invoicing function.

Creditors (owed by the business)

Keep a list of amounts owed out too. You may receive invoices after your year end with a date relating to your account’s year.

These expenses also need to be included in the accounts and should be provided to your accountant so that tax relief can be obtained.

Consider using the aged creditor function on your software if you use billing/invoicing function.

Invoice attaching

For certain types of cloud-based accounting systems like QuickBooks, you can attach invoices to your transactions.

Simply hit the paperclip icon on the transaction and attach your document with ease.