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HMRC internal manual

VAT Health

Dispensing by a GP: The VAT allowance

NHS GPs are paid the cost of supplying the drugs and appliances which they both personally administer and dispense on the NHS. Until April 2006 this included an amount to cover the VAT incurred - the VAT allowance - unless the GP was registered for VAT. The VAT allowance was paid regardless of whether the drugs and appliances were used in making taxable or exempt supplies. From 1 April 2006, the rules for paying the VAT allowance to doctors in England changed. From that date the NHS only pays a VAT allowance for drugs that are classified as being for personal administration. This change in the Department of Health’s rules on remuneration has prompted many dispensing GPs to register for VAT as they now have no other means of recovering the VAT incurred on drugs purchased for dispensing. Similar arrangements came into force in Scotland from 1 April 2011.