Is VAT an issue.
Recently a number of Osteopaths have picked up on the proposed changes to the implementation of VAT charging rules by HM Revenue & Customs. When VAT was introduced it was hailed as a “simple and easy to follow” system. Unfortunately through successive budgets, it has become one of the most complex taxes around. Some of the lunatic cases that have gone through the Court system, all the way to the House of Lords, beggar belief. More on that later.
HM Revenue & Customs have issued VAT Notice 701/57 in January this year outlining how they are changing their view of VAT exemptions for Health Professionals. They are creating a distinction between your activities which are “for the primary purpose of protecting, maintaining or restoring a person’s health” and any other activities you undertake such as medical reports, sale of goods etc. Providing you remain on the GOC register, then your activities in the first category remain exempt whilst your activities in the second category are chargeable to VAT. Before you let that worry you, we need to go back one stage in the VAT regulations.
As stated in the VAT Notice, VAT is a tax on supplies
§ Made in the UK
§ By a VAT registered person
§ In the course of business
It is the middle one that we need to focus on.
Any person in business can choose to be VAT registered – I have always maintained that you do so only if there is an appreciable advantage and in most cases, certainly in exempt medical professions, there is not. So you only need to be concerned about these new regulations if you have to be registered for VAT. You will be required to register for VAT if your gross turnover on potentially VATable items exceeds the registration threshold. Currently this is £68,000 in a 12 month period.
I would have thought that there are very few Osteopaths earning this much money per year from carrying out these VATable activities so in my view there is nothing to worry about. I would recommend that everyone ensures that their record keeping clearly separates income from exempt activities and income from non-exempt activities.
If anybody wishes to have a brief discussion, at no charge, on their own situation, I would be only too pleased to assist.