Currently, some employment bereaux (typically referred to as agencies) which provide staff to the NHS act as ‘principals’, charging VAT on the whole supply, whereas others act as ‘agents’, only charging VAT on the commission element.

As stated above, VAT on nursing and admin staff is generally considered recoverable in either case, however bereaux which act as principals for the supply of doctors/locums create a higher VAT cost to their NHS clients in light of HMRC’s rules.

We have recently become aware that HMRC are now challenging the ‘agency’ treatment of some employment bereaux providing doctors/locums, stating that they should be accounting for VAT on the whole supply.  This dispute is due to be heard in the VAT Tribunal.

If HMRC succeed, it could mean that all doctors/locums bereaux will be forced to account for VAT on the whole of their supply, further burdening the NHS with non-recoverable VAT.  We will keep you posted with developments.