NHS and VAT

mikeyboy

Hello,

Can someone help here, I am trying to establish the VAT position for NHS Hospitals.

Do they pay VAT at the standard rate and then reclaim it?

Does anyone know how it works? especially if leasing/hiring equipment to them..

Thanks

mysmeg

Sorry, I don't have an answer for you. But the general Vat advise line will be able to help you. They are technicaally trained in all aspects of VAT including special schemes and partial exemptions etc. Their number is 0845 010 9000 and its much easier talking to someone than trying to find answers on the website which is a nightmare. Hope this helps you.
Meg

melancholly

my understanding is that if it is something for medical treatment then VAT isn't payable.... but they should know this and be able to provide a VAT exemption certificate to prove it!

JasonLVC

The NHS operates under an extra statutory concession (ESC) known as "Contracted-out Services" or "COS" for short.

Hospitals provide mainly exempt services of medical care and so they are not allowed to charge VAT nor are they allowed to reclaim any input tax. Even a private hospital or an NHS one that charges a fee for an operation, day patient, treatment, etc are all exempt income streams.

Equally, the NHS generally incurs VAT at the standard rate when it buys things in such as medical equipment, supplies, etc.

Becuase of this, the ESC allows NHS hopsitals to reclaim input tax on services which have been 'contracted-out' but could have been done in-house. In other words, service contracts such as cleaning, maintenance which would have been done by in-house staff can now be contracted-out to the private sector and the NHS is allowed to reclaim that VAT back (otherwise, private firms would be more expensive than the NHS hiring their own). This is why the NHS hires and leases more equipment than in the old days as it is 'cheaper.

Services extend to hire or lease of equipment, but there are caveats and certain services which are excluded. here is a full list of the services where the NHS can reclaim input tax :-

http://www.ros.gov.uk/foi/finance/chapter10.htm

GP's are not part of the NHS for contracted out services purposes, not are NHS dentists unless the surgeries are within a hospital (ie, run directly by the PCT).

Be careful, the NHS also operates a charitable arm which sometimes purchases equipment for use in the hospital, these come under a different set of rules (zero rating for charitable, non-business purposes) and so you need to be sure who you are selling to - the hospital or its charity.

Trust that helps.

JasonLVC

melancholly wrote: »

my understanding is that if it is something for medical treatment then VAT isn't payable.... but they should know this and be able to provide a VAT exemption certificate to prove it!

I cannot think where the service of hiring equipment would ever be exempted (zero rated). The exemtpion only applies to charitable non-business use which is hard to achieve for a hospital as the hospital is partially in business (whenever it charges a private patient for an x-ray for instance) so if the equipment is not used for fee paying patients then yes the exemption would apply - but only if it was a purchase, purhased via the charitable arm of the NHS body.

Sorry to correct you, didn't want other readers to think the NHS gets a free ride, it doesn't.

The responsibility is on the supplier to get the VAT right, not the customer as if the supplier doesn't charge VAT and they should have, the signed certificate is not worth the paper it is written on and HMRC will hit the supplier for a VAT bill, interest and penalties if HMRC ever find out about the transaction.

melancholly

sorry - my experience has been in terms of university funded work carried out on a hospital site, where the VAT exemption applies for items bought for medical use. VAT exemption certificates are increasingly required by suppliers so that they have the paper trail in case it gets queried, so i'm very surprised that the certificate would not be any use.

(i also wouldn't ever want to suggest that the NHS gets a 'free ride'. it seems entirely fair to me that they wouldn't have to pay VAT for essential medical supplies )

JasonLVC

Strange but unfortunately very true. If the NHS wanted to buy a new MRI scanner (£1.5mish) or even the magnet that goes inside it (£400k ish) they are all subject to VAT and irrecoverable unless used for pure (new) research purposes (which is where you probably fit in with your research works), or if purchased via the charitable arm/fundraising arm of the Trust (again, the university may deal with the charitable arm of the Trust).

The legislation states Zero rating applies where relevant goods’ (ie, medical equipment) are supplied to ‘eligible bodies’ (ie, the NHS); either by way of donation or by payment with funds provided by a charity or from voluntary contributions (so if paid directly by NHS funds, not eligible, if paid for by charity/donated then zero rating applies); and the eligible body is a charitable institution providing care or medical or surgical treatment for handicapped persons (relevant to hospices mainly), the supply is zero-rated (VATA 1994, Sch. 8, Grp. 15, items 4 and 5).

The exemption certificates give the supplier the evidence they need to zero rate a supply to a customer, but if upon HMRC inspection that customer is not eligible and the supplier did not take sufficient care to check themselves (under reasonable care guidelines) for the supply to be exempted (actually, zero rated, the phrase exemption is a bit of a false description), HMRC will seek the VAT that should have been charged from the supplier.

The supplier would then have to go back to the customer (if they still exist) and demand payment but the customer is under no legal obligation to abide by such a request and so the supplier either has to go to court to prove a deliberate/accidental intent to mislead or take the VAT hit themselves.

I've just dealt with a client who had zero rated an extension for a disabled person. They accepted the certificate from the local Housing Association who was paying for the works, turns out the works were not eligible for zero rating, client now owes £15k to the VATman. Customer is an old disabled lady and the HA hasn't got any more money left to pay-up so client is stuck with either a big VAT bill or having to take an old disabled lady to court. Neither of which are palatable.

1984ReturnsForReal_2

mikeyboy wrote: »

Hello,

Can someone help here, I am trying to establish the VAT position for NHS Hospitals.

Do they pay VAT at the standard rate and then reclaim it?

Does anyone know how it works? especially if leasing/hiring equipment to them..

Thanks

I would of though they pay VAT & dont reclaim it because they have no sales (or very little).


99% sure.

mikeyboy

Another question relating to my very old thread...

Can anyone clarify the position for Dentists, be they NhS and/or private, can they claim back VAT?

Thanks

JasonLVC

mikeyboy wrote: »

Another question relating to my very old thread...

Can anyone clarify the position for Dentists, be they NhS and/or private, can they claim back VAT?

Thanks

Dentists and GP's are the same as hospitals in that they provide 'medical services' and these are all exempt activities for VAT purposes.....this means the Dentist or GP cannot charge VAT for his/her services and cannot recalim any input tax on their expenditure.

It doesn't matter if they are private or NHS dentists, they are both exempt medical services and no input tax recovery allowed.

Non-medical income such as dentists selling toothbrushes or GP's signing off insurance claims/passport photos are not medical and are standard rated and nso they'd charge VAT for that income and they'd be able to reclaim partial inout tax - but only where the expenditure directlym relates to the VATable income (ie, if dentists sells tooth brushes with VAT on,m they can reclaim the VAT on the toothbrushes they buy in).


....now you know why medical care is bloomin' expensive!

Oakey1967

I would like to clarify a point if I may. I will be planning to sell implants used in surgical procedures to the NHS. Is VAT to be charged on these or not? Thanks