Partially-Exempt Businesses for VAT Purposes

Written on 13 Jun 2013

 

  • Exempt services

There are some goods and services on which VAT is not charged. These are exempt from VAT. All primary health care is exempt and this includes primary medical care provided in hospitals, both NHS and private. However, exemption also applies to services such as conducting medical examinations of individuals for employers or insurance companies provided that those services are intended in the main to protect or restore the health of the person concerned. Services that principally do not are taxable for VAT purposes. This includes medico-legal services.

 

  • Supplying exempt services only

If your business only supplies private practice medical services then your business is an exempt business and you cannot register for VAT or recover any VAT you incur on your purchases or expenses.

 

  • Supplying exempt and taxable services

If, however, your business supplies both private practice and medico-legal medical services then your business is partly exempt and you may benefit from voluntarily registering for VAT if your medico-legal turnover has not crossed the registration threshold of £79,000. If your medico-legal turnover for the previous 12 months is more than the threshold or you expect it to go over in the next 30 days alone then you must register for VAT regardless. 

 

  • Reclaiming VAT in a partly exempt business

If your business is partly exempt and you want to reclaim the VAT you incur on purchases and expenses, you will have to:

    •  Identify purchases that relate entirely to your medico-legal medical services and the items that relate entirely to your private practice medical services.
    •  Identify purchases that relate to both private practice and medico-legal medical services – e.g. phone bills or accountancy fees.

 

As a general rule, you can reclaim all the input tax you have paid on purchases that relate entirely to medico-legal medical services, none of the input tax on your purchases that relate entirely to private practice medical services and a proportion of the input tax that relates to mixed use. You can work out the proportion you can reclaim using HM Revenue & Customs’ (HMRC's) standard method.

 If you can show that you have paid only a relatively small amount of input tax on your purchases that relate to your private practice medical services you may be able to reclaim all of that input tax and the way to determine this is to satisfy the following:

  • The amount is not more than £625 per month on average.
  •  The amount is not more than half of your total input tax reclaimed.

 

Questions?

Should you require further information or you think this may affect your business, please contact us.

Written by

Share this: Twitter Facebook

« Previous

Next »