HMRC has published two updated VAT Notices (701/31 – Health Institutions and 701/57 – Health Professionals). These include a few areas of clarification which are of interest to NHS bodies.
Self Employed Locums
As part of the Health Professionals update, the VAT treatment of supplies made by self-employed GP locums, has been clarified. This now states that when self–employed GP locums supply their services to an employment business which makes an onward supply to a third party who is legally responsible for providing health care to the final patient, both the supplies to and from the employment business are taxable.
Doctors supplying locum services via employment agencies or on a self-employed basis where the recipient of the service (e.g. an NHS body) is legally responsible for the care should consider whether VAT registration is required.
It must also be noted that where an NHS body utilises agency locums or locums operating through their own company or on a self-employed basis, any VAT charged will not be recoverable by the NHS body.
Contracted-Out Pharmacy Arrangements
The updated Health Institutions notice now provides additional guidance on independent pharmacies operating within hospitals. By concession, HMRC allow pharmacists (including those operating from an independent pharmacy within hospital premises) to zero-rate drugs, medicines and other qualifying goods that are supplied to:
- an in-patient of a hospital or
- any person attending the premises of a hospital for medical care or treatment where all of the following conditions are met:
- The items dispensed are qualifying goods designed or adapted for use in connection with medical or surgical treatment
- The items are dispensed by a pharmacist in the normal way, on the prescription of a medical practitioner who is providing primary health care services
- The items are intended for self-administration by the person named on the prescription
- The items are supplied separately from, and do not form any part of, any medical services, treatment or care provided in the hospital or nursing home
- In the case of NHS prescriptions, the pharmacist is acting under the appropriate NHS Pharmaceutical regulations, and is reimbursed for the dispensed items by one of the NHS bodies that pay for community pharmacy services.
The notice goes on to state that the application of this concession must not give rise to any abuse of the VAT system and HMRC may withdraw or restrict the application of this concession if they have reasonable cause to believe that it is being used for tax avoidance purposes.
The full revised notices can be obtained from the following links: