VAT status of locum doctors confirmed

HMRC have ended uncertainty over the VAT status of locum doctor fees, issuing a clarification that they can be treated as VAT exempt even when the locum works via an employment agency.

This follows HMRC’s loss in an important VAT case late last year, when a VAT Tribunal supported the Isle of Wight NHS Trust’s argument that locum doctors provided via agencies were VAT exempt, not standard rated as HMRC had previously argued.

Importantly, this new HMRC viewpoint only applies to GMC registered locum doctors, not other healthcare professionals, and only when the doctor is performing medical services in a professional capacity.

This ruling helps clarify the position of GP locums who operate via a limited company. In the past there has been something of a question mark over whether their services should be standard rated. This new HMRC brief clarifies those services can be VAT exempt, as long as they are medical services provided by a GMC registered doctor.

Some GP practices may have used locum agencies in the past who have charged VAT on their invoices. This new ruling may now mean that that VAT has been charged in error, but the only way to obtain a refund of that is to ask the locum agency to adjust those old invoices. The willingness of the locum agencies to do this will depend on their terms and conditions, and it is possible that some will be reluctant to do this as reclassifying their income as VAT exempt rather than standard rated will significantly reduce the amount of input VAT they can claim on their costs.