The Value Added Tax (VAT) does not apply to health care services provided by qualified health care professionals, even when they normally charge for their services. It is important for both health care professionals and consumers to understand the VAT exemptions which apply to healthcare.
The VAT is Britain’s consumption and sales tax. The standard VAT rate was 17.5% in 2010, rising to 20% in 2011. However, there are numerous situations in which partial or no VAT applies, as a result of the Second Hand Goods Scheme, the Tour Operators’ Margin Scheme, the Capital Goods Scheme, and various other special exemption policies.
Revenue & Customs has produced a specific document explaining VAT for health professionals, Notice 701/57. The VAT health care services exemption applies to services provided by health professionals. The government considers as medical professionals all medical doctors (including opthalmologists, opticians, dentists and orthodontists), as well as pharmacists, nurses, chiropractors, midwives, hearing aid providers, dieticians, physiotherapists, paramedics, radiologists, speech therapists, podiatrists, pharmacists and occupational therapists. Note that the scheme explicitly does not apply to alternative medicine practitioners operating in fields such as acupuncture, psychotherapy, or hypnotherapy.
These people are not required to charge VAT on services which they provide, when those services are in keeping with the nature of their profession (a medical doctor would not charge VAT for medical services, for instance, but he would not be exempt from charging VAT in an unrelated field should he own a business in that sector). In addition, the service in question must be directly related to the health of the patient. This includes nursing care, consultations with a pharmacist, and sight and hearing exams.
It does not mean, however, that any health care service is automatically exempt from VAT. Unregistered health care workers, health care services which cannot be linked to the prevention, diagnosis, or treatment of a medical condition, or related services (like DNA testing for paternity purposes) are not VAT exempt. In addition, public health education, family planning services, and cosmetic surgery may or may not be exempt, depending on the particular nature of the case. Doctors do not normally need to collect on services they are legally required to provide, even if they bill for this; such issues include death certificates (no fee, so no tax), a food poisoning certificate, an autopsy ordered by a coroner, or providing expert testimony in court.
Because the VAT exemption rules for health care services can be somewhat complicated, if you are paying for a medical service, make sure you are aware of the VAT implications. Health care providers may want to consult a qualified source, such as a lawyer knowledgeable about tax law, if they are concerned about how to manage this aspect of their business.