VATHLT2080 - Doctors: Liability to VAT of out-of-hours cover

The health and welfare exemption include supplies of deputising services where the provider of the services takes direct responsibility for medical care. This is covered by Item 5 of Group 7 to Schedule 9 of the VAT Act 1994 (VATA). This service is exempt under Item 1(a) or (d) of Item 5 of Group 7 to Schedule 9 of the VATA, when the relevant criteria are met. The relevant criteria ensure that medical care services are being supplied. (Please note, the medical professionals should fall within the exemption by virtue of Item 1 of Group 7 to Schedule 9 of the VATA where medical care services are being supplied. Item 5 was introduced to ensure that the full package of deputising services would be covered, including ancillary services (such as answering the telephones) which were not covered by Item 1).

If what is being supplied is something other than medical care, for example, the supply of medical staff, then the exemption cannot apply, and the supplies will be taxable at the standard rate.

Where an out-of-hours service is provided by non-registered health professionals or amounts to no more than a telephone answering service, any ‘back-up’ services will also be taxable at the standard rate.

Locums

Item 5 does not include the services of self–employed locum doctors. The services of a locum are different to the deputising service described above. In all cases where a locum doctor is supplied by an employment business or similar body to a third party (for example, a GP practice) which controls and directs him or her, a supply of staff is being provided. Supplies of staff do not fall within the exemption and are therefore taxable, with VAT being due at the standard-rate. Where a self-employed locum supplies services to an employment business, which in turn makes an onward supply to third party (who provides health care to the final patient), both the supply by the locum to the employment business and the supply by the employment business to the third party are taxable.

NB. In both scenarios above, the contracts are often unclear. Therefore, as well as looking at the contracts, it is also necessary to look at the economic reality, what is happening on a day to day basis to establish the correct tax position.