Specialist care providers face tax challenges

The Court of Appeal has delivered a judgment against specialist healthcare business LIFE Services and The Learning Centre (Romford) that highlights the VAT challenges facing private healthcare providers which are not regulated by the Care Quality Commission (CQC) or who do not have charitable status.

The decision concerns the treatment of VAT on the provision of day care services to vulnerable adults by private companies yet, says accountants Hillier Hopkins, equally applies to businesses providing Covid PCR tests, blood tests, and nursing and care homes where day care is provided.

The Court of Appeal was asked to determine the liability of VAT on healthcare services provided by private companies. The Court of Appeal upheld HMRC’s position that VAT is only exempt where providers are charities, public bodies or regulated by a relevant body, such as the CQC.

Ruth Corkin, VAT and indirect tax principal at Hillier Hopkins said: ‘In this case, LIFE and The Learning Centre provided care plans agreed and funded by a local authority. The provision of that care was monitoring and inspected by the local authority, and not the CQC.

‘LIFE and The Learning Centre argued that the services were exempt from VAT and HMRC disagreed. The Court of Appeal agrees with HMRC.’

The Court of Appeal said in its decision that what ‘is required is that the institution or agency is ‘approved, licensed, registered or exempted from registration in respect of the supply of welfare services by any Minister or other authority.’

Ruth Corkin said: ‘Membership of a professional or trade body does not meet this requirement.

Day care services open to everyone and laboratory testing facilities providing tests for businesses are not required to be regulated under law and cannot, therefore, register with the CQC.

In Scotland, however, day care services are regulated under the devolved government, making VAT treatment that much more complex.

Ruth adds: ‘VAT is complex at the best of times. It becomes even more so when there is the provision of specialist care. Specialist care providers should seek the support and advice from an accountant that has a deep understanding of the sector and issues at hand.’

Photo Credit – Scott Graham