Changes which came into effect from 1 May 2007 meant that certain medical services which were previously treated as exempt from VAT became subject to VAT at the standard-rate.  We announced in our previous bulletins that these changes affected NHS Trusts which generate non-NHS business income from activities such as clinical trials or occupational health services.

One of the most relevant areas of change for the NHS was ‘post-mortem examinations and reports’ provided to coroners, which became fully taxable from 1 May 2007.

Some NHS bodies may still not have changed their VAT treatment of this income and this may result in HMRC assessing for the undeclared output tax to-date.  As this income is usually invoiced to councils and local authorities which are able to recover the VAT, Trusts would be advised to consider issuing additional invoices for the VAT not charged to-date and start declaring VAT correctly in the future.

This change in VAT treatment also creates a right to recover input tax on certain costs associated with this income generation area.