NHS bodies should be aware of a newly published concession which may lead to a decrease in VAT being charged on nursing services which is currently eligible for recovery under the Contracted-Out Services (“COS”) rules.

HMRC have now permitted nursing agencies (or employment businesses providing nurses, midwives, and other health professionals) to exempt the supply of nursing staff and nursing auxiliaries supplied to an NHS body (provided that they are registered with an organisation approved by HMRC).

Qualifying suppliers providing nursing auxiliaries or care assistants may use the concession if the individuals they place undertake some direct form of medical care (such as administering drugs or taking blood pressures, for the final patient).  However, the concession does not apply to supplies of general care assistants who are only involved in providing personal care such as catering, washing or dressing the patients.

In some cases, it may be in the interests of nursing agencies to continue to charge VAT, rather than to exempt their supplies.

For example, certain nursing agencies may be taxable businesses which are able to recover 100% of the VAT which they incur in respect of nursing and auxiliary staff which they supply (because they are supplied subject to VAT).  Therefore, they may feel that their own VAT recovery will be restricted by adopting the concession to certain services.  This is likely to lead to an increase in the costs to their NHS clients because of the irrecoverable VAT costs.   As a result, there may be scope for certain NHS bodies to ask such agencies to continue to charge VAT on certain services described above.  If the agencies agree, then NHS bodies may continue to recover the VAT on the costs of supplies of nursing and auxiliary services which they incur, (until at least the COS rules change).

If you would like further details regarding this concession, and the impact it may have on your NHS body’s recoverable VAT, please do not hesitate to contact us.