Policy paper

VAT treatment for supplies of a deputy for a medical practitioner — repeal of Item 5 of Group 7 of Schedule 9 of the VAT Act 1994

Published 28 October 2026

Who is likely to be affected 

This measure is likely to affect businesses in the medical employment services industry that make supplies of a deputy for a medical practitioner and those in receipt of these supplies, including NHS Trusts and private healthcare providers.

General description of the measure 

The measure removes the VAT exemption for the supply of a deputy for a registered medical practitioner. 

Policy objective 

The policy objective of this measure is to ensure that VAT exemption only applies to services consisting of medical care, including deputising services. The measure removes an exemption for a supply of staff.

As a result, the amendment returns to HMRC’s previous intended policy position. Deputising services will remain exempt from VAT whilst supplies of a deputy for a medical practitioner will be standard rated. 

Background to the measure 

The measure was announced at Budget 2026 and included in Finance Bill 2026-27. 

Detailed proposal 

Operative date 

The measure will have effect on and after 1 May 2027. 

Current law

The current law can be found in Group 7 of Schedule 9 to the Value Added Tax Act (VATA) 1994.

Proposed revisions 

Legislation will be introduced in Finance Bill 2026-27 to amend Group 7 of Schedule 9, VATA 1994. This will remove Item 5 from the group, which is an exemption for the provision of a deputy for a registered medical practitioner. 

Summary of impacts 

Exchequer impact (£ million) 

2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030	2030 to 2031	2031 to 2032
—	+85	+95	+100	+100	+105

These figures are set out in Table 6.1 of Budget 2026 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Budget 2026. 

Economic impact 

This measure is not expected to have any significant macroeconomic impacts. 

Impact on individuals, households and families 

The measure is not expected to impact individuals, households and families as it does not change the provision of or access to medical care services provided by a deputy for a medical practitioner. 

Some deputies for a medical practitioner may be sole traders. If they are providing services directly to a healthcare provider (NHS Trust or private practice), depending on the contractual details, this may be a VAT exempt supply of medical care services. If not, this measure confirms that VAT will apply. 

This measure is not expected to impact individuals’ experience of dealing with HMRC as it does not change any tax obligations or processes for individuals. There is expected to be no impact on family formation, stability or breakdown.

Equalities impacts 

The measure may apply to individuals regardless of their protected characteristics. HMRC does not hold data it can use to assess whether there are any disproportionate impacts to protected groups.

Administrative impact on business including civil society organisations 

This measure is expected to have a negligible impact on NHS bodies and private healthcare providers.

The measure is expected to have a significant administrative impact on employment businesses and other organisations supplying deputies for a medical practitioner, by removing the VAT exemption for such supplies, thereby returning to the previously established position that they are not exempt from VAT. Deputising services which primarily constitute medical care, such as out of hours deputising services, will continue to be exempt from VAT. 

One-off costs for all impacted businesses will include familiarisation with the change to return to the intended policy. One-off costs for employment agencies and other organisations supplying deputies for a medical practitioner additionally include updating accounting software, updating invoicing software and some smaller organisations registering for VAT if their taxable turnover exceeds the VAT threshold. Total one-off costs are estimated to be £7 million. 

Ongoing savings for employment agencies and other organisations supplying deputies for a medical practitioner who are no longer partially exempt would include lower costs of submitting VAT returns and maintaining a VAT account. Ongoing costs for some smaller employment agencies and other organisations supplying deputies for a medical practitioner who register for VAT include maintaining a VAT account, submitting VAT returns to HMRC, accounting for VAT on invoices and paying VAT to HMRC. Net ongoing savings are estimated to be negligible. 

Estimated one-off impact on transitional businesses costs

One-off impact	Amount
Costs	£7 million
Savings	—

Estimated continuing impact on administrative burden

Continuing average annual impact	Amount
Costs	negligible
Savings	£100,000
Net impact on annual administrative burden	negligible

There is expected to be no impact on civil society organisations. 

Operational impact (£ million) (HMRC or other) 

HMRC will not incur significant operational costs in implementing this measure. 

Other impacts 

Other impacts have been considered, and none have been identified. 

Monitoring and evaluation 

Consideration will be given to monitoring this measure through information collected through existing HMRC VAT reporting and compliance processes.

Further advice 

If you have any questions about this change, contact Ihsan Shaikh by telephone on 03000 566426 or by email at Ihsan.Shaikh@HMRC.gov.uk.