VAT Notice 701/57: health professionals and pharmaceutical products

Updated 31 July 2014


This notice cancels and replaces Notice 701/57 (November 2012). Details of any changes to the previous version can be found in paragraph 1.2 of this notice.

1. Introduction

1.1 What is this notice about?

This notice explains:

  • the VAT liability of goods and services provided by registered health, medical and paramedical professionals, including the VAT liability of drugs, medicines and other goods available on prescription, as well as contraceptives and smoking cessation products
  • the circumstances in which VAT registered health professionals may recover the VAT they have incurred on purchases and overheads
  • specific rules that apply to supplies made by dentists, overseas medical practitioners and deputising doctors
  • the circumstances in which care services provided by non-health registered suppliers are VAT exempt
  • the VAT liability of supplies of health professional staff

For details of supplies made by hospitals, hospices, pathology laboratories or other state-regulated institutions providing healthcare see Notice 701/31 Health institutions.

For details of the VAT relief for goods and services provided to disabled persons see Notice 701/7 VAT reliefs for people with disabilities.

This notice and others mentioned are available on the HM Revenue and Customs (HMRC) website.

1.2 What has changed?

This notice updates and replaces the November 2012 edition. It clarifies the VAT liability of services provided by health professionals and unregistered staff working in state-regulated laboratories and the scope of the exemption for diagnosis services.

1.3 Who should read this notice?

You should read this notice if you are:

  • a registered health professional
  • a care provider who is not enrolled on any register of medical or health professionals
  • an employment business that is providing care staff to hospitals or similar healthcare institutions

1.4 What law is covered within this notice?

The relevant law covering…. is the Value Added Tax Act 1994….
Exemption for services performed or directly supervised by certain registered medical and health professionals Schedule 9, Group 7, Items 1 to 3
Exemption for the services of a deputising doctor Schedule 9, Group 7, Item 5
Zero-rating for qualifying goods dispensed to an individual for his or her personal use on the prescription of an appropriate practitioner dispensed by a registered pharmacist, or in accordance with a requirement or authorisation under a relevant provision - see section 3 below. Schedule 8, Group 12, Item 1

1.5 Glossary of acronyms

A glossary of acronyms used in this notice can be found in section 12.

2. Medical services provided by registered health professionals

2.1 What does ‘health professional’ mean?

By ‘health professional’, we mean the following professionals when they are enrolled or registered on the appropriate statutory register:

  • medical practitioners
  • optometrists and dispensing opticians
  • professionals registered under the Health Professions Order 2001 - these professionals are, arts therapists, biomedical scientists, chiropodists/podiatrists, clinical scientists, dieticians, hearing aid dispensers, occupational therapists, operating department practitioners, orthoptists, paramedics, physiotherapists, practitioner psychologists, prosthetists and orthotists, radiographers, and speech and language therapists, but will also include any medical care professionals added to the Order at a future date
  • osteopaths
  • chiropractors
  • nurses, midwives and health visitors
  • dentists, dental hygienists, dental therapists, dental nurses, clinical dental technicians, dental technicians and orthodontic therapists
  • pharmacists

2.2 Can therapists who are not registered or enrolled under any statutory register exempt their supplies?

No they cannot. Therapists such as acupuncturists, psychotherapists, hypnotherapists and others who do not have statutory registers as described in paragraph 2.1 above cannot currently exempt their services. The UK’s approach of linking exemption to statutory registration is considered to be a sensible, objective criterion for defining ‘health professionals’ for VAT purposes, and is consistent with European Union law.

2.3 What are medical services and which services performed by health professionals are exempt from VAT?

If you are a health professional as detailed in paragraph 2.1, your services are exempt when both of the following conditions are met:

  1. The services are within the profession in which you are registered to practise.

  2. The primary purpose of the services is the protection, maintenance or restoration of the health of the person concerned.

For the purposes of VAT, medical services (including medical care and treatment) are restricted only to services which fulfil the second condition above. This includes the diagnosis of illnesses, the provision of analyses of scans or samples and helping a health professional, hospital or similar institution to make a diagnosis.

The following are examples of services which we accept are for the primary purpose of protecting, maintaining or restoring a person’s health:

  • health services provided under GMS, PMS, APMS, GDS and PDS contracts
  • sight testing and prescribing by opticians (only in England, Wales and Northern Ireland)
  • primary eye examinations and secondary eye examinations (only in Scotland)
  • enhanced eye health services
  • laser eye surgery
  • hearing tests
  • treatment provided by osteopaths and chiropractors
  • nursing care provided in a patient’s own home, and
  • pharmaceutical advice
  • services involving the diagnosis of an illness or the provision of analyses of samples forming an important part of a diagnosis

However, certain insurance or education related services may also be exempt regardless of purpose, as they may qualify under other, independent, exemptions.

2.4 What services performed by health professionals may be taxable or exempt?

Following from condition 2 in paragraph 2.3 some services will be taxable or exempt, depending on their primary purpose. This is particularly the case in the area of medical reports and certificates, and in these cases, it is necessary to establish their principal purpose, before liability can be determined.

Where the service is principally aimed at the protection, maintenance or restoration of health of the person concerned, the supply is exempt. However, where a medical report is done solely to provide a third party with a necessary element for taking a decision for insurance or legal purposes, the supply is taxable at the standard rate. Detailed examples are given in section 4.

2.5 What services are not exempt from VAT?

The following services are taxable at the standard rate:

  • health services not performed by an appropriately qualified and registered health professional, except when either directly supervised by such a person or provided within a hospital or within other state-regulated institutions providing healthcare, this is explained further in section 5
  • services not aimed at the prevention, diagnosis, treatment or cure of a disease or health disorder, such as paternity testing and the writing of articles for journals
  • services directly supervised by a pharmacist
  • general administrative services such as countersigning passport applications and providing character references
  • supplies of health professional staff, except where they are treated as being exempt from VAT under the nursing agencies’ concession, this is explained further in section 6

This list is not exhaustive. If you supply any of these services, you may be required to register for VAT. Notice 700/1 ‘Should I be registered for VAT?’ explains the rules relating to registration.

2.6 Do clinical trials undertaken by health professionals qualify for exemption?

Your supply will only be exempt if it involves patient care, eg, where you are required to monitor a patient involved in the trial for adverse reactions which may be detrimental to their health. If your involvement with the patient is restricted to monitoring side-effects for analytical purposes, or if you provide analytical testing services which do not relate to an individual patient, this service is standard-rated.

3. Pharmaceutical goods supplied with or without medical treatment

3.1 Do I need to account for VAT on goods supplied in connection with VAT exempt medical treatment?

If you provide medical treatment that is exempt from VAT, any charge that you make for bandages, drugs, medicines or prostheses, administered or applied to your patient in the course of the treatment is also exempt.

Any items that are separable from the treatment (such as privately dispensed drugs supplied for self administration by a patient, for example, for overseas travel purposes) are not exempt from VAT, and will usually be standard-rated. However, see paragraphs 3.3 and 3.4 for supplies of contraceptive and smoking cessation products. The supply of drugs, medicines and other items to patients by a pharmacist or doctor is zero rated in certain circumstances. - see paragraph 3.2.

3.2 When can goods being provided on prescription be zero-rated for VAT purposes?

The supply of drugs, medicines and other items for personal use of patients can be zero-rated only if all the following conditions are met:

  • the supply must be of ‘qualifying goods’ - see 3.2.1 below
  • the goods must be dispensed to an individual for that individual’s personal use
  • the goods must not be supplied for use for patients while in hospital or in a similar institution or administered, injected or applied by health professionals to their patients in the course of medical treatment
  • the goods must be dispensed by a registered pharmacist or under a requirement or authorisation under a ‘relevant provision’ - see 3.2.2 below
  • the goods must be prescribed by an appropriate ‘relevant practitioner’ - see 3.2.3 below

3.2.1 What are ‘qualifying goods’?

These are any goods designed or adapted for use with any medical or surgical treatment except for hearing aids, dentures, spectacles and contact lenses.

3.2.2 What does dispensed under a requirement or authorisation under a ‘relevant provision’ mean?

The relevant provisions are as follows:

  • article 57 of the Health and Personal Social Services (Northern Ireland) Order 1972
  • regulation 20 of the National Health Service (Pharmaceutical Services) Regulations 1992
  • regulation 12 of the Pharmaceutical Services Regulations (Northern Ireland) 1997
  • paragraph 44 of Schedule 5 to the National Health Service (General Medical Services Contracts) (Scotland) Regulations 2004
  • paragraph 15 of Schedule 1 to the National Health Service (Primary Medical Services Section 17C Agreements) (Scotland) Regulations 2004
  • (paragraphs 47 and 49 of Schedule 6 to the National Health Service (General Medical Services Contracts) Regulations 2004
  • paragraph 44 of Schedule 5 to the Health and Personal Social Services (General Medical Services Contracts) Regulations (Northern Ireland) 2004
  • paragraphs 46, 48 and 49 of Schedule 5 to the National Health Service (Personal Medical Services Agreements) Regulations 2004
  • paragraph 47 of Schedule 6 to the National Health Service (General Medical Services Contracts) (Wales) Regulations 2004
  • regulation 60 of the National Health Service (Pharmaceutical Services) Regulations 2005

3.2.3 Who are ‘relevant practitioners’?

These are registered medical practitioners and dentists registered in the dentists’ register under the Dentists Act 1984. Also included are community practitioner nurse prescribers, nurse independent prescribers, optometrists, independent prescribers, pharmacist independent prescribers and supplementary prescribers, as defined in article 1(2) of the Prescription Only Medicines (Human Use) Order 1997(a).

Further information on the supply of drugs etc by general practitioners (GPs) can be found at paragraph 7.4 and by pharmacists at section 11.

3.3 Contraceptive products

Contraceptives prescribed and dispensed in accordance with the provisions of paragraph 3.2 above are zero-rated. Contraceptives that are fitted injected or implanted by a health professional form part of a VAT exempt supply of medical care.

The reduced rate of VAT applies to all other supplies of contraceptive products - including sales by retailers, vending machines or via the internet - regardless of whether purchased by an individual or organisation such as a sexual health charity or the NHS. However, the VAT treatment of fertility monitoring devices or any product used for natural family planning is not subject to the reduced rate.

3.4 Smoking cessation products

Smoking cessation products prescribed and dispensed in accordance with the provisions of paragraph 3.2 above are zero-rated. The reduced rate applies to all other supplies of pharmaceutical smoking cessation products, including supplies made over the internet. This includes all non-prescribed sales of patches, gums, inhalators and other pharmaceutical products held out for sale for the primary purpose of helping people to quit smoking.

4. Liability of specific services provided by health professionals

Doctors provide a number of services which are also carried out by other registered health professionals, such as occupational health. To avoid duplication, in the services described below ‘doctor’ also refers to other registered health professionals, where appropriate.

4.1 Access to medical records

In certain circumstances individual patients or their representatives are entitled, by law, to ask for access to or copies of health records (including hand-written clinical notes, copies of letters to and from other health professionals, laboratory reports, X-rays, other imaging records and printouts from monitoring equipment) or medical reports written about them.

Data Protection Act 1998 - requests for copies of personal data are termed ‘Subject Access Requests’ (‘SAR’). Where the holder of the records receives a SAR they are obliged to provide the information requested, but may make a charge for so doing. The maximum amount of the fee is set by Regulation, and is a nominal sum to cover the expense of complying with the legal obligation to give access.

Access to Medical Reports Act 1988 - this Act governs access to medical reports made by the person’s own GP for insurance or employment purposes. The patient is entitled to ask for a copy of the report and, where such a request is made, the GP must provide one but can charge a reasonable fee to cover their costs incurred in so doing.

Access to Health Records Act 1990 and Access to Health Records (Northern Ireland) Order 1993 - these pieces of legislation facilitate access to the health records of deceased persons only by that individual’s personal representative and anyone with a claim arising out of the person’s death. The holder of those records is legally required to provide copies of records requested under this legislation. They may charge a fee for so doing, but it must not exceed the cost of making and mailing the copy to the applicant. Access to the health records of living persons will be made under the Data Protection Act 1998 noted above

Where a doctor provides a copy of all or part of a medical record or report under the terms of one of the four statutory requirements set out above, that activity is outside the scope of VAT. But where a copy of a health record is provided in circumstances that do not fall within one of these statutory obligations, that is a taxable supply, and liable to VAT at the standard-rate.

See also statutory services under paragraph 4.13.

4.2 Certificates/reports

Most supplies of certificates and reports are liable to VAT at the standard rate as they allow a third party to make a decision and contain no element of therapeutic care. For example, they may let claims to compensation, benefits or registration as a blind or disabled person, which themselves give entitlement to certain services. However, where the principal purpose of certificates and reports is to protect, maintain or restore the health of the individual, then they are exempt - for example, sick notes and certain reports required as part of adoption procedures.

Where fitness certificates are provided as a condition of a person taking up a particular profession or sporting activity, they are taxable at the standard-rate. However, where they are provided to, for example, an employer for the purpose of ensuring that the employer recognises that the individual’s health places limitations on certain activities (for example they should not undertake heavy lifting due to a severe back problem), then the purpose of the supply is principally to protect the health of the individual and is exempt.

Doctors may also provide reports under the ‘exercise on prescription’ scheme. This is a scheme funded by the NHS under which gym membership is provided free to certain defined patients with certain defined illnesses as part of the patient’s rehabilitation. As these supplies are aimed at restoring the health of the individual concerned, such reports are exempt.

4.3 Psychologists’ services

With effect from 1 July 2009 practitioner psychologists became regulated by the Health Professionals Council, meaning that any supplies of medical care they make became exempt from VAT from that date. Practitioner psychologists come under seven domains: clinical, counselling, educational, forensic, health, occupational, and sport/exercise. Psychologists who work purely in academic research and experimental psychology and who do not offer services to the general public are excluded from regulation, meaning that there is no change in the VAT treatment of their services.

‘Medical care’ means any service relating to the protection, maintenance or restoration of the mental health of the person concerned. Medical care includes services such as counselling, working with children with emotional problems, dealing with criminals’ behavioural problems or running stress management courses. It does not include supplies of time management services, which are not related to the mental health of the client.

4.4 Cosmetic services

Each case will need to be considered on its individual merits. However, we will generally accept that cosmetic services are exempt where they are undertaken as an element of a health care treatment programme. Where services are undertaken purely for cosmetic reasons, they will be standard rated. For services undertaken by hospitals and state-regulated institutions, see Notice 701/31 Health institutions.

4.5 Education services

Doctors undertake a wide variety of education-related activities and consideration should be given to whether they qualify as an exempt supply of education (see Notice 701/30 Education and vocational training) before considering whether they qualify as a supply of exempt healthcare.

Lectures (be they one-off or a series) given as part of a medical training course or Continuing Professional Development and training sessions to first aiders, which are provided by a doctor in either a sole proprietor or partnership capacity, are exempt as a supply of private tuition under the education exemption.

Presentations aimed at promoting health are also considered to be exempt as their principal purpose is to protect the health of the individuals attending. However, presentations given to a non-medical audience on, for example, the latest medical developments are considered to be taxable.

4.6 Family planning and fertility services

This covers such services as counselling, contraception and sterilisation (and reversals), as well as IVF (In Vitro Fertilisation) treatment all of which we accept as being for the principal purpose of protecting the health of the person concerned and therefore exempt.

4.7 Forensic physicians

When forensic physicians are employed by the Home Office their services are outside the scope of VAT. However, when forensic services are undertaken as and when required by local doctors on a fees basis, we accept that such services are exempt healthcare, as they are primarily concerned with the health of the victims or perpetrators of crime. If a statement or report is required at a later stage, this will be a separate supply which is liable to VAT at the standard rate.

4.8 Insurance services

Medicals and reports are requested by insurance companies for a broad range of insurance purposes. Some services, whilst forming a mandatory condition of the policy once accepted, have a therapeutic purpose and we accept that the following medical services commissioned by insurance companies meet the purpose test and qualify as an exempt supply of health in principle:

  • health screening under private medical insurance policies - these are regular check-ups to detect early signs of disease
  • income/credit protection insurance - medical services where the policy holder has fallen ill (as opposed to losing his job) and which are aimed at assisting the individual in returning to a normal life
  • motor insurance - where medicals services are provided under a policy to assist in enabling an injured motorist to return to full health and/or work. (Note - this does not include medicals undertaken for DVLA (Driver and Vehicle Licensing Agency) purposes to make sure initial or continued fitness to drive which are liable to VAT at the standard rate)
  • any other medical service provided in connection with an insurance policy where the principal aim is to assist in restoring the health of the individual

In addition, when medicals and reports are provided in connection with the bringing together of parties to a contract of insurance, the administration of policies or the handling of insurance claims under such contracts, these services are currently exempt as insurance related services under the insurance exemption - see Notice 701/36 Insurance.

Medicals and reports provided purely for the purposes of valuing policies for tax reasons, for example, in relation to inheritance tax, are liable to VAT at the standard rate.

Rehabilitation services are dealt with separately, at paragraph 4.12 below.

This includes work performed by doctors such as medicals, reports and expert witness testimony for the judicial system and is considered to be liable to VAT at the standard rate. This is the case even where the services supplied are for the purpose of the Family Courts and where the ultimate decision arrived at by the court may concern the well-being of an individual. This is because the principal purpose of the services supplied is to let the court to take a decision.

Medical evidence services which are outsourced administrative services, such as arranging the provision of expert witnesses and obtaining medical reports, are also liable to VAT at the standard rate.

4.10 Mental health tribunals

These are to let a panel of registered health professionals to determine whether a person should commence or continue being detained under the Mental Health Act. As the purpose of the detention is to assess and treat the condition and is focused on helping people who are ill, but whose consent to treatment could not otherwise be obtained, we accept that services provided by way of the preliminary examination, observations and the tribunal sitting are exempt as the services are directly linked to the treatment of the person.

4.11 Occupational health

Occupational health services are now provided by individual doctors and a wide range of organisations with varying legal status. It is a rapidly growing field and a significant proportion of occupational health services have been contracted out by the NHS to commercial bodies.

Broadly speaking, services provided in this field fall into the following categories with the liability as indicated:

Pre-employment medicals - although now very rarely performed in the light of recent equality legislation, these are taxable supplies as they are primarily for the purpose of enabling a prospective employer to take a decision on recruitment. This includes medicals (and reports) for the purpose of determining whether a person is medically fit enough to join a professional register. However, in most cases medicals now only take place once an applicant has been offered a job and a job offer is made conditional on the results of the medical. Again these medicals are taxable because they are primarily done so that the employer can make a decision on recruitment.

Sometimes medicals are performed on successful job applicants to help determine the most suitable location for them to work within an organisation. As the medical is done primarily with the health interests of the successful applicants in mind, the employers having already decided to recruit them, such supplies are exempt.

Post-employment medicals - where these are to:

  • make sure a person is medically well enough to undertake proposed work activities
  • assess whether proposed work could adversely affect their health and to make recommendations to minimise any risk accordingly
  • determine whether early retirement on ill-health grounds is appropriate

then the principal purpose is protecting the health of the individual concerned and the supply is exempt. However, where the medical is undertaken to determine whether a person can join a pension scheme, the supply is liable to VAT at the standard rate as the principal purpose is to let a third party to take a decision.

In-service health screening - this service is provided either at an employee’s request or following a management referral. It can also be provided as a result of statutory requirements. Where someone attends on their own initiative, it is often because they want advice on how a particular health condition affects their performance or about how the work affects their health. Services provided can include checking blood pressure, sugar levels (diabetes) cholesterol etc. As they are aimed at protecting, restoring and maintaining the health of the individual, they are exempt from VAT.

Management referrals are often made because of poor attendance or performance where there are no known underlying health problems. In these cases, the clinic provides advice on how to manage common health problems, provides immediate restorative care, or may consult with the person’s GP, and makes recommendations re referral for physiotherapy, counselling etc. Whilst this service allows the employer to make a decision with regards to the individual’s future, the underlying purpose of the referral is to deal with the medical problem, and it is therefore exempt from VAT as it is undertaken for the purposes of protecting and restoring the health of the individual. (Related reports are considered incidental to the principal supply of health and are therefore also exempt.)

Occupational health providers may also carry out immunisations to protect employees whose work presents particular risk of infection - this is clearly exempt protection of an individual’s health.

Risk assessments including advice on ergonomic layouts - these identify risk in the workplace, quantify it and advise on measures to control it - for example, by issuing protective clothing or changing procedures. Whilst many are undertaken as a result of statutory health and safety requirements, these are generally not undertaken by health professionals in the exercise of their respective professions. As such they are taxable whether undertaken by a registered or non-registered health professional.

Training and advice - this may qualify as an exempt supply of education (see above), but otherwise essentially represents the occupational health provider’s role in promoting and advising on health issues for the purposes of maintaining the good health of the company’s employees. It is therefore considered to qualify for exemption as medical care.

4.12 Rehabilitation services

These services are exempt if their principal purpose is to improve both the physical and psychological health of the individual. Reports commissioned for the purpose of determining what is required to assist rehabilitation and recovery, are also exempt. Reports commissioned for the purpose of quantifying the additional costs of disability and hence, the value of any claims for compensation, are liable to VAT at the standard rate.

4.13 Statutory services

Doctors supply a number of services under various statutes. Where no fee is charged, there is no consideration and therefore no supply. Where a fee is charged, but the doctor is compelled by statute to provide the service, it will be outside the scope of VAT. In all other circumstances, the doctor will be making a supply by way of business, which may be taxable or exempt depending on the principal purpose of the supply:

As there is separate health legislation for England, Wales, Scotland and Northern Ireland, it is not possible to give precise details of all the relevant legislation here, but examples of the type of services covered by statute include:

  • registration of deaths - the medical practitioner attending a person during their last illness prior to death must issue the death certificate - no fee is charged for this, so there is no supply
  • public health legislation - a medical practitioner who becomes aware that a patient he is attending is suffering from a notifiable disease or food poisoning must issue a certificate to the local authority, the practitioner is entitled to make a charge for this, but this supply is outside the scope of VAT as the charge is made under statute
  • legislation relating to coroners’ services - coroners can appoint a doctor (pathologist) to carry out a post mortem if necessary - if the doctor is compelled to accept this appointment, the charge made for this supply is outside the scope of VAT
  • Supreme Court Act 1981 this is where a High Court calls in the aid of a specialist to give evidence of facts, and is relevant to the giving of professional evidence only (see 4.14 below) - as the specialist is required to attend where called, the charge made for attending (including any re-imbursement of allowances) is outside the scope of VAT
  • Blood Test (Evidence of Paternity) Regulations - doctors are not obliged by statute to provide these services (although fees charged are set by statute) - fees charged are therefore consideration for a supply and are taxable at the standard rate

4.14 Witness testimony and allowances

Services of providing professional (giving evidence of facts acquired as a result of your professional position and not covered by the Supreme Court Act 1981 above) and expert (giving an expert opinion) witness evidence for the courts are liable to VAT at the standard rate as the principal purpose is to let a third party, the court, to take a decision. Allowances paid to doctors to cover their costs whilst appearing in court as a professional or expert witness (including travelling and accommodation costs and reimbursement of a locum’s charges) are regarded as part of the overall payment for the witness’s services and are taxable.

Allowances paid to doctors where they are called as an ordinary witness are considered to be outside the scope of VAT as in these cases, they are called as a member of the public, and not in their professional capacity.

5. Exemption for care services performed by suppliers that are not enrolled on a statutory professional register

5.1 Can corporate bodies make supplies of health care?

Yes, provided that their medical services are wholly performed by employees who are health professionals.

5.2 Can care services performed by a person not enrolled on a statutory medical register be exempt?

Yes, but only when the service is health or nursing care that is provided either:

  • under the direct supervision of a health professional (other than a pharmacist) who monitors the services through regular checks (see paragraph 5.3)
  • or in a hospital or nursing home (see paragraph 5.4)

5.3 When are services ‘directly supervised’?

Care services provided by any person who is not a registered health professional, are ‘directly supervised’ for the purposes of the VAT exemption, when all of the following conditions are met:

  • the services are supervised by one of the registered health professionals listed in paragraph 2.1 and the supervisor is professionally qualified to perform and supervise the service
  • the service requires supervision by a registered health professional, and is provided predominantly to meet the medical needs of a client
  • the supervisor has a direct relationship with the staff performing the service, and is contractually responsible for supervising their services
  • a qualified supervisor is available for the whole time that the care service is provided
  • no more than 2,000 hours per week of staff time are supervised by a single health professional
  • a supervisor has a say in the level of care to be provided to the client, and will usually see the client prior to the commencement of the care service
  • the supervisor must be able to demonstrate that they monitor the work of the unregistered staff

Where the above conditions are not met, your services are standard-rated, even when performed to meet the medical or health care needs of a client.

5.4 When are the services of unregistered staff working in a hospital or other state-regulated institution exempt?

Medical services performed by unregistered staff may also be VAT exempt when all of the following conditions are met:

  • the care service is performed in a hospital, nursing home, hospice, pathology laboratory or other state-regulated health institution (see Notice 701/31 Health institutions)
  • the unregistered staff working in a hospital, nursing home, hospice, pathology laboratory or other state-regulated health institution provide care that is directly connected with the welfare of the recipient - this would normally involve the provision of personal care services, but not services such as catering or hairdressing

6. Supplies of health professional staff

This section explains the liability position of supplies of health professional staff. Generally speaking, apart from the nursing agencies’ concession mentioned in paragraph 6.5, all supplies of health professional staff are taxable for VAT purposes.

6.1 Agency or arrangement fees

If you are an agent, your commission, fee or any other charge that you make for arranging and administering the supply is standard-rated.

6.2 How do I decide whether I am an agent or a principal?

This is determined by reference to your contractual and other arrangements. Notice 700 The VAT Guide contains further details that may help you decide whether you are an agent or principal.

6.3 Supplies of registered health professionals (other than nurses) by employment businesses acting as a principal

The Employment Agencies Act 1973 defines an ‘employment business’ as a ‘business (whether or not carried on with a view to profit and whether or not carried on in conjunction with any other business) of supplying persons in the employment of the person carrying on the business, to act for, and under the control of, other persons in any capacity’.

Staff supplied by an employment business may be either employees of that business, or self-employed and engaged by that business. In both cases the workers’ services are provided to the employment business, which in turn makes a supply of that worker to the client. If the worker comes under the direction and control of the client, this is a supply of staff. The employment business in these circumstances is acting as the ‘principal’.

When an employment business supplies registered health professionals (other than staff subject to the nursing agencies’ concession referred to in paragraph 6.5) as a principal to a third party, where the health professional is working under the control and guidance of the third party, it is making a taxable supply of staff to that third party - not an exempt supply of healthcare. It is the third party which is responsible for providing healthcare to the final patient, rather than the business supplying the staff which has no such responsibility.

A taxable supply of staff is made even where the employment business is responsible for ensuring that the workers it provides are properly trained and qualified when they work under the control of the third party.

However, if the employment business maintains the direction and control of its health professional staff to make a supply of medical care directly to a final consumer, then the employment business is providing medical services rather than merely a supply of staff. In these circumstances, the business is making an exempt supply of health services (provided, of course, the services meet the conditions for exemption under section 2.3 above).

6.4 Supplies of self-employed locum GPs

When self-employed locum GPs 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. The fact that the locum GPs may be supplied to a prison or other institution where they may not be supervised by any medical staff does not mean that the employment business supplying the locum doctor to the third party is legally responsible for providing healthcare to the final patient.

6.5 Supplies of nurses, nursing auxiliaries and care assistants by state regulated agencies (the nursing agencies’ concession)

By an informal Extra-statutory concession, nursing agencies (or employment businesses that provide nurses and midwives, as well as other health professionals) may exempt the supply of nursing staff and nursing auxiliaries supplied as a principal to a third party, if the supply is of:

  • a person registered in the register of qualified nurses and midwives maintained under article 5 of the Nursing and Midwifery Order 2001 providing medical care to the final patient
  • an unregistered nursing auxiliary who is ‘directly supervised’ by one of the above
  • an unregistered nursing auxiliary, whose services are supplied to a hospital (NHS or private), hospice, care home with nursing under item 4 of Group 7, Schedule 9 VAT Act 1994 and form part of the care made to the patient

A nursing auxiliary (also known as a healthcare assistant) is an individual who is not enrolled on any register of medical or health professionals but whose duties must include the provision of medical, as well as personal, care to patients.

The institution to which staff are supplied may be operated by a local authority, NHS body, charity or other organisation operating in the public or private sector.

To qualify for the concession, the employment business must be registered with one of the following organisations:

  • Scottish Commission for the Regulation of Care
  • Care Standards Inspectorate for Wales
  • Northern Ireland Health and Personal Social Services Regulation and Improvement Authority
  • Care Quality Commission (for supplies before 1 October 2010)

In England, with effect from 1 October 2010 (as a result of changes announced in the Health and Social Care Act 2008), the legal requirement for nursing agencies to be registered under the Care Quality Commission ceased and responsibility for quality standards has passed to those organisations that provide the regulated activity. Therefore for supplies on or after 1 October 2010, the concession applies to employment business that would have been required to be registered with the Care Quality Commission before that date.

For the supply of nursing auxiliaries or care assistants to benefit from the concession, they must undertake some direct form of medical care, such as administering drugs or taking blood pressures, for the final patient. 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
  • working in care homes without nursing where they do not require supervision by health professionals to provide their services

However, where a state-regulated domiciliary care agency supplies the services of its care assistants directly to the final patient, we would see the agency as making an exempt supply of welfare services - see Notice 701/2 Welfare.

HMRC regularly review Extra Statutory Concessions.

6.6 The wording of terms and conditions of agreements

Some employment businesses state in their contract terms that their staff are still working under their control and direction rather than the third party to which their staff are being supplied. If that is the case, you are not acting as an ‘employment business’ within the definition of the Employment Agencies Act 1973. The VAT liability of a supply is not determined conclusively by the terms of any contract or other documentation alone. If the wording of a contract does not reflect any changes in the way that the business actually operates in practice, the VAT liability of a taxable supply of staff will not change.

6.7 Supplies of contracted-out health services

As is clear from above, employment businesses in the health sector make a taxable supply of staff to third parties, such as hospitals or hospices, if the third party is legally responsible for the onward supply of providing care to the final recipient. This is subject to the nursing agencies’ concession. The mere fact that an employment business is state-regulated does not mean that its supplies of staff are exempt if they are not covered by the nursing agencies’ concession.

However, when state-regulated health providers provide health services to the final consumer, these services remain exempt even if they are contracted out and paid for by a hospital or other third party. For example, a NHS hospital may subcontract the provision of medical care to a separate clinic providing dialysis treatment. Although the NHS trust may pay the clinic for its services, this does not mean that the clinic has made a supply of staff to the NHS. This is because the clinic’s staff will still be working under the direction and control of the clinic itself throughout the provision of the services rather than under the hospital trust.

7. GPs - VAT liability of supplies

7.1 Other NHS income

GP practices receive a monthly Statement of Fees of NHS payments due to the practice. All of these payments (other than accounting or timing adjustments) are consideration for the practice’s supplies of medical services.

Payments will be liable to VAT depending on their principal purpose and according to the principles and guidance outlined in sections 2 and 4 of this notice. Thus, payments relating to activities where the principal purpose is the protection, maintenance or restoration of the health of the patient (for example, anti-coagulant monitoring, childhood immunisations, flu and pneumococcal vaccinations) are payments for exempt supplies. However, payments in relation to services such as the completion of forms to let persons to obtain blue/orange disability badges are liable to VAT at the standard rate.

‘General’ payments and reimbursements of practice costs (for example GMS global sum, MPIG correction factor, computer costs, notional rent) are also payments directly related to exempt services unless the practice has dispensing activity, in which case they will cover taxable and exempt supplies. In such cases, they will need to be apportioned in accordance with the guidance given in Notice 700 The VAT Guide on apportionment.

7.2 NHS payments to doctors for drugs and appliances

You will also receive from the NHS reimbursement for any drugs and appliances that you have dispensed or administered to patients. If you are a doctor authorised to provide NHS pharmaceutical services, this payment will consist of:

  • a taxable element - that part of the payment which relates to items you have dispensed to a patient under NHS pharmaceutical regulations, and to supplies of oxygen
  • an exempt element - that part of the payment which relates to drugs or appliances you have administered to a patient

Paragraph 7.3 explains how you should calculate what proportion of this reimbursement is taxable.

7.3 How do dispensing doctors calculate how much of their NHS payment for drugs and appliances is taxable?

Dispensing doctors receive 2 statements from the NHS, 1 relating to dispensed drugs and the other to their supply of medical services. To determine the value of exempt supplies from the drug statement HMRC considers that, whilst not being entirely accurate, the net value of the VAT allowance can be used as a proxy for the exempt supplies of drugs. If you wish to determine exempt values more accurately you may, provided that the method used is not arbitrary and can be audited by officers of HMRC. An apportionment of the dispensing fees figure will also need to be made. Notice 700 The VAT Guide gives details on acceptable apportionment methods.

7.4 What is the VAT liability of goods supplied to patients by a doctor?

If you are a doctor who is authorised to provide NHS pharmaceutical services to certain patients, (see sub-paragraph 3.2.3) the payments you receive from the NHS for items dispensed to those patients are zero-rated, provided that the items are:

  • dispensed to the patient on the basis of an NHS prescription
  • taken away from the surgery, and
  • supplied for the personal use of the patient

NHS payments received in respect of the drugs or appliances that you have personally administered, injected or applied to a patient in the course of medical treatment are exempt, even if you are authorised to provide NHS pharmaceutical services.

VAT may be due on any other items that you supply to patients (see section 3) including medicines dispensed by a doctor against a private prescription.

8. VAT registered health professionals and VAT recovery

8.1 What VAT may health professionals recover?

If you are a VAT registered health professional, you are entitled to deduct the input tax incurred on costs that you use or intend to use in making taxable supplies. You may therefore reclaim the VAT that you have paid on any purchases that are directly attributable to your taxable (standard- and/or zero-rated) supplies. This will include drugs and medicines purchased by doctors for supply to patients under NHS pharmaceutical arrangements.

However, you cannot normally deduct input tax that relates to your exempt supplies. This includes VAT incurred on the drugs or appliances that doctors have personally administered, injected or applied to their patients in the course of medical treatment.

If your input tax relates to both taxable and exempt supplies - which can often be the case with business/surgery overheads such as utility charges or purchases of items of medical equipment - this is known as residual or non-attributable input tax. You can normally deduct only the amount of this that relates to your taxable supplies.

VAT incurred in respect of non-business activities, such as statutory work, is not input tax and can not be recovered.

8.2 How should health professionals work out how much VAT they may recover?

If you are a VAT registered health professional making both taxable and exempt supplies, you are partly exempt for VAT purposes. Notice 706 Partial exemption explains how partly exempt traders should calculate how much of the VAT incurred on business overheads and purchases may be recovered. As part of that calculation, you are required to distinguish between:

  • supplies and purchases that relate to taxable (standard or zero-rated) activity, for example services not aimed at the protection, maintenance or restoration of health, or NHS pharmaceutical services provided by doctors
  • supplies and purchases that relate to exempt activity, such as the services detailed in paragraph 2.3 or the administration of drugs in the course of medical treatment
  • supplies and purchases that relate to both taxable (standard and zero-rated) and exempt activity, such as overheads

You should work out which of your supplies are taxable and which are exempt with reference to the liability rules detailed elsewhere in this notice.

8.3 Dispensing doctors

Although the amounts shown on the statements received from the NHS relate to supplies made two or three months earlier, it has been agreed that the values to be used in the standard partial exemption method will be the amounts shown on the statements/payments received in the period (see paragraph 7.3 for determining exempt/taxable values).

9. Medical practitioners visiting the UK

9.1 Are the services of medical practitioners from other EU Member States exempt?

If you are a national of any European Economic Area (EEA) State, are lawfully established in medical practice in an EEA State other than the UK and you are visiting the UK to provide medical services temporarily, you will be required to register in the register of medical practitioners as a visiting EEA practitioner before you can exempt your supplies.

In an urgent case a medical practitioner from an EEA State may not be in a position to register in the register for medical practitioners prior to visiting the UK and providing services, for example, where a visitor to the UK is taken ill and wishes to be treated by his own doctor. You can exempt your supply in such circumstances provided you seek registration as a visiting practitioner, usually no longer than 15 days after the service has been performed.

10. Dentists, dental care professions and dental technicians

10.1 What is the liability of services and goods supplied by the above?

If you are a dentist, a dental care professional or a dental technician you may exempt your supplies of

  • dental care and treatment
  • drugs or appliances provided in the course of dental care and treatment
  • dental prostheses (including dentures, artificial teeth, crowns, bridges, palates and other orthodontic appliances)

The exemption applies whether or not you provide your services privately or on the NHS. Items, other than prostheses, that are separable from dental treatment provided to a patient will usually be standard rated. This includes any supply of toothbrushes, toothpaste and dental floss.

Advisory services - for example, advising on clinical governance, poor performance and standards - as supplied by a small number of dentists to Clinical Commissioning Groups on a self-employed basis are generally also standard rated. Where such services are provided on an employee (not self-employed) basis, any income received will be outside the scope of VAT.

Cosmetic dentistry services will need to be considered on a case by case basis and will be exempt only where they are supplied as an element of oral health treatment by a registered health professional, as part of a health care treatment programme. For services undertaken by hospitals and state-regulated institutions, see Notice 701/31 Health institutions.

10.2 Supplies between dentists within the same practice

A dental practice is often comprised of a number of dentists operating from the same premises. When there is more than one dentist within a practice there may be payments between the dentists in respect of shared facilities, equipment, prostheses and staff. Such charges are exempt provided that they relate to services or facilities that are:

  • predominantly medical in nature
  • necessary to allow the recipient to perform dentistry

This exemption does not apply to:

  • any supplies made by a dentist who has ceased to practise, or by a landlord who is not a dentist
  • supplies of goods (other than dental prostheses) that are held out for sale to patients, such as toothpaste and toothbrushes
  • any sales of dental equipment by a practice owner

11. Pharmacists

11.1 Contractual framework for community pharmacy services

The framework for community pharmacy services came into effect from 1 April 2005 in England and Wales and required pharmacies to provide the services detailed in paragraphs 11.2 to 11.8 from 1 October 2005 onwards. The Scottish contractual framework (which is different from the English and Welsh one) was introduced on 1 April 2006 - see paragraph 11.9 below. The Northern Irish framework is still being negotiated. Separate guidance will be provided in respect of these arrangements, if required, in due course.

11.2 What services do pharmacies provide?

Pharmacy services fall into three categories, essential, advanced, and enhanced. All pharmacies provide essential services; some may also provide advanced and enhanced services, depending on the terms of their contracts with Clinical Commissioning Groups.

11.3 What are essential services?

Essential services comprise dispensing and repeat dispensing, disposal of unwanted medicines, signposting, promotion of healthy lifestyles, support for self care, and support for people with disabilities.

11.4 What is the VAT liability of essential services?

11.4.1 Dispensing and repeat dispensing

Where dispensing or repeat dispensing is undertaken by a registered pharmacist, against a prescription issued under all the conditions described in paragraph 3.2 the pharmacists are making a zero-rated supply of goods.

There are a number of payments which relate to the dispensing activity. These are:

  • item fee
  • establishment payment
  • protected payment
  • repeat dispensing annual payment
  • transitional payment
  • special fees for dispensing controlled or expensive drugs and for measuring and fitting appliances that the pharmacy also customises

All of these payments are consideration for dispensed goods and zero-rated where the conditions for zero-rating are met.

11.4.2 Disposal of unwanted medicines

This service involves taking in unwanted medicines, sorting and storing them until the appropriate health authority arranges for them to be collected and destroyed. It is a standard-rated supply.

11.4.3 Signposting

This activity provides patients with information about other, non-pharmaceutical services which might be beneficial to them. The service does not need to be performed by a registered pharmacist and is standard-rated.

11.4.4 Promotion of healthy lifestyles

This is 1 service comprising 2 stages, the provision of information by means of leaflets and poster displays and individually tailored advice given by the pharmacist to patients in certain identified at-risk groups. The latter element is the predominant one and is aimed at the maintenance of a person’s health. Accordingly, this service is exempt.

11.4.5 Support for self-care

This involves providing patients with pharmaceutical advice about medicines and other products available over-the-counter. The pharmacist’s provision of advice will be exempt. Any medicines sold over-the-counter will be a separate, standard-rated supply.

11.4.6 Support for people with disabilities

This is extra support provided to patients in response to their assessed need, in order to facilitate their safe self-administration of medicines. This support is a requirement under the Disability Discrimination Act 1995 and can comprise:

  • special labelling of containers for use by visually disabled patients
  • removing drugs from blister packs and repackaging them in replacement containers such as multi-compartment boxes
  • reminder charts

This activity is a further aspect of the dispensing of prescribed medicines and is zero-rated where the medicines themselves are zero-rated.

11.5 What does the practice payment cover and must I apportion it?

All of the supplies under 11.4.2 to 11.4.6 are covered by the ‘practice payment’. This payment also covers ‘clinical governance’, ie, an element of it funds the professional delivery of NHS pharmacy services. Clinical governance is not a supply for VAT purposes and this funding is outside the scope.

The practice payment is therefore made up of 6 elements, 2 of which are standard-rated, 2 exempt, 1 zero-rated and 1 outside the scope. You will need to apportion it between these elements in order to calculate your taxable and exempt supplies and any output tax due. Information on the percentage weighting to be applied to each element is available from the Pharmaceutical Services Negotiating Committee.

11.6 Advanced services and their VAT liability

The medicines use review and prescription intervention are advanced services. These involve reviewing a patient’s needs for and use of medicines, including whether the patient is experiencing any side effects or other problems. These services are exempt.

11.7 Enhanced services

Clinical Commissioning Groups and local Health Boards in Scotland can also contract with pharmacies to deliver other, local enhanced services. General advice on the most commonly encountered services is set out below. However, these arrangements are tailored to meet local needs and so the actual contractual terms can be subject to variation. In determining the correct liability of your supplies you will need to examine the particular arrangements you have entered into, bearing in mind the single/multiple supply rules and taking account of the status of the person performing the service. Please contact our helpline for further details on single/multiple supply rules.

11.7.1 Needle and syringe exchange

Typically, this service may involve making clean needles and syringes available free of charge to drug users and diabetics, disposing of used needles safely and providing health education advice and information to service users.

Sterile needles and other materials are often provided free of charge to users by the Clinical Commissioning Group or local Health Board via the pharmacy. Accordingly, the free issue of these goods is not subject to VAT.

Where a registered pharmacist:

  • assesses the condition of service users and, where appropriate, provides 1-to-1 health advice or treatment
  • provides 1-to-1 advice to service users about safe injecting techniques
  • where appropriate, provides 1-to-1 advice on dealing with injecting or drug related infections and illnesses

the service will be an exempt supply. The pharmacist does not need to provide these services to every service user for VAT exemption to apply. However, we would expect the contract to require these services to be provided to service users on request, or where considered appropriate by the pharmacist.

The service will be standard rated where:

  • the pharmacist is merely issuing new needles and overseeing the surrender of old ones and has no role in assessing the health condition of the service user
  • the service does not require the skills and experience of a pharmacist and is such that it could be, or is, carried out by a pharmacy assistant or any other member of staff who is not a registered pharmacist
  • the pharmacist’s provision of health education or information goes no further than issuing standard leaflets to service users

11.7.2 Minor ailment service

Under this service pharmacies provide support to eligible patients presenting with a minor ailment such as conjunctivitis or diarrhoea. Following assessment, the pharmacist might give advice, supply appropriate over-the-counter medicines or dressings to treat the ailment and/or refer the patient to another health professional. In providing the service the pharmacy works to guidelines set out in a local protocol which will define the groups of persons eligible to receive treatment and the formulary from which medicines may be issued.

Where assessment of the patient’s condition and the provision of advice and support in managing the ailment are carried out by a pharmacist, this is an exempt service. But any medicines or dressings issued will be standard-rated where they constitute separate supplies of goods. Payment for the goods is made by the NHS rather than the patient.

11.7.3 Patient Group Directions (PGDs)

These directions are drawn up locally. They permit pharmacists to issue defined drugs to a class of patients presenting with particular conditions. PGDs do not amount to ‘prescriptions’ because they are not written in respect of an identified, individual patient so the supply of goods will be taxable at the standard rate.

Contractors requiring assistance in determining the liability of their enhanced services should contact our helpline.

11.8 Other payments received by pharmacists

11.8.1 Electronic Prescription Service (EPS)

EPS lets prescribers send and dispensers receive prescriptions electronically (ie, drugs and medicines are dispensed against electronic rather than paper prescriptions). In order to operate EPS, a contractor needs to comply with the requirements for the EPS system.

EPS is being deployed with 2 releases of software (Release 1 and Release 2). Contractors will receive 2 fees as a contribution for implementing Release 1 and 1 fee for implementing Release 2. These fees reflect pharmacies having the right information technology and software systems in place.

Once a contractor is in a position to operate either Release 1 or Release 2 they can claim an ongoing monthly fee to contribute to connectivity and information technology maintenance costs.

None of these fees are consideration for supplies made. They are funding to support EPS and accordingly are outside the scope of VAT.

11.8.2 Prescription charge refunds

Sometimes patients who are exempt from paying NHS prescription charges need to obtain prescription medicines before they have received the certificate that confirms their status. In these circumstances they pay the prescription charge when their medicines are dispensed but claim it back at a later date, once they hold the necessary documentation. Under the contractual framework for community pharmacy, pharmacies will be responsible for making these refunds, but there is no clearly distinguishable payment for this activity. It does not amount to a supply for VAT purposes.

11.8.3 Exit payments

During the first year of the contractual framework, any pharmacy dispensing less than 2,000 items per month, and which decides to close, will receive a one-off payment equal to the amount it would have received under the Professional Allowance (an allowance paid under previous funding arrangements), had it remained open for a further year. This payment is not consideration for any supply made by the pharmacy and is outside the scope of VAT.

11.9 Contractual framework for community pharmacy services (Scotland)

The Scottish Contractual Framework was introduced on 1 April 2006. The new Scottish Contractual Framework’s structure is different from its English and Welsh equivalent. Rather than differing levels of service it has 4 distinct core components:

  • Acute Medication Service (AMS) - this is essentially the dispensing of prescriptions - see section 3
  • Minor Ailments Service (MAS) - see sub-paragraph 11.7.2
  • Chronic Medication Service (CMS) - this allows a pharmacist to manage a patient’s long-term medication for up to 12 months, a patient can have their medicines provided, monitored, reviewed and, in some cases, adjusted as part of a shared care agreement between the patient, GP and community pharmacist - patients have to register with a pharmacy - see section 3
  • Public Health Service (PHS) - pharmacies are able to provide information in public health issues and create public health window displays, they are expected to participate in national and local public health campaigns, payment for this service is a fixed fee - see paragraph 4.5 on health education services

Although the new contract officially started in April 2006, implementation was phased. MAS and PHS began from July 2006, AMS from April 2008 and CMS from April 2009. On top of the core contract pharmacists are also able to provide additional services similar to the enhanced service level of the English and Welsh contract (see 11.6) as part of their business, making community pharmacies more viable in smaller communities.

12. Glossary of acronyms

Term Description
AMS Acute Medication Services
APMS Alternative Provider Medical Services
CMS Chronic Medication Services
DVLA Driver and Vehicle Licensing Agency
ECJ European Court of Justice
GDS General Dental Services
GMS General Medical Services
MAS Minor Ailments Services
MPIG Minimum Practice Income Guarantee
PCT Primary Care Trust
PDS Personal Dental Services
PHS Public Health Services
PMS Personal Medical Services

Your rights and obligations

Your Charter explains what you can expect from us and what we expect from you. For more information go to Your Charter.

Do you have any comments or suggestions?

If you have any comments or suggestions to make about this notice, please write to:

HM Revenue and Customs
VAT Liability Policy Team
3rd Floor
100 Parliament Street