VQOTW: Medical services provided by locums

My client is a consultant dermatologist who retired from her NHS position some time ago, but is continuing to operate her private clinic via her own personal services company. Her former NHS Trust have recently approached her to provide cover on an ad hoc basis via a locum agency they recommend.

This is likely to prove quite lucrative and I am concerned that added to her private clinic income she will breach the VAT registration limit. Please could you advise?

The key difference here is to distinguish between a supply of medical services which is exempt from VAT and a supply of staff which is taxable at the standard-rate. Exempt supplies do not count towards taxable turnover for the purposes of VAT registration.

HMRC accept that direct patient treatment by a registered medical professional qualifies as exempt from VAT under Item 1 Group 7 Schedule 9 VAT Act 1994. However they maintain that in order for this exemption to apply the provider of the medical services must be contractually responsible for providing the healthcare to the patient. As such, services provided via a locum agency are standard-rated both as a supply to the agency by the self-employed practitioner and by the agency to the NHS/third party private hospital. This should not be confused with deputising, more commonly known as out of hours services, which are exempt under item 5 Group 7.

HMRC have recently updated VAT Notice 701/57 to illustrate the difference between the two scenarios:

6.4 Deputising Services

The health and welfare exemption include supplies of deputising services where the provider takes direct responsibility for medical care. The relevant Clinical Commissioning Group is responsible for ensuring that there is out-of-hours cover. GPs can contract with a commercial deputising entity to perform their out-of-hours duties. Where this service is provided by registered doctors or nurses, who provide medical advice or care, then the exemption applies. The main out-of-hours calls are channelled through to the NHS 111 service, although they could be outsourced elsewhere. The exemption does not apply where non-medical advice is given or when advice is given by a person who is not a medical professional, unless they are supervised by a medical professional for example, call centre staff working from a crib sheet of standard questions to filter out calls and only advising people to contact a doctor or dial 999 for an ambulance.

6.5 Supplies of self-employed locum doctors including GPs

The services of a locum are different to the deputising service described above. Where a locum doctor is supplied by an employment business or similar body to a third party (like a GP Practice) which controls and directs him or her, it is a supply of staff. Supplies of staff do not fall within the exemption and are therefore taxable, with VAT being charged at the standard-rate. When a self-employed locum supplies their services to an employment business (including via a Personal Services Company) which in turn makes an onward supply to third party, who is legally responsible for providing healthcare to the final patient, both the supply to the employment business and the supply by the employment business to the third party are taxable.

The fact that the locum may not be supervised by any medical staff of the third party does not mean that the employment business supplying the locum doctor is legally responsible for providing healthcare to the final patient.

In your client’s case she should monitor her turnover from the locum agency services as that will be her taxable turnover, but can continue to exclude any exempt charges made direct to her own patients.

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VAT Advice Consultant
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Sally is the Team Leader of the VAT Advice and Consultancy team at Croner Taxwise. She has worked in VAT since 1990, including eight years spent with HMRC, both as an Assurance and Enquiries Officer involved in presenting seminars and business education. Since joining private practice in 1999, Sally has specialised in providing VAT technical advice to a variety of clients, ranging from small one-man bands to large multi-national corporations, on the full range of VAT technical matters.

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