Should you be paying VAT?

Many colleagues are under the impression that the question of medical VAT and aesthetic treatments is a new one. It may come as a surprise to some to hear that the British College of Aesthetic Medicine started to engage with HMRC more than 11 years ago about this complex and hugely important issue. Whilst there should be clarity, particularly as the law has not changed in that time period, many members are still the subject of challenges from HMRC. This should come as no surprise as the law allows for both circumstances where one would apply VAT and one would not for the same type of treatment depending on therapeutic gain for the patient. On the other hand, it is surprising that despite clarity from the ECJ on the matter we have yet to have affirmation at a VAT Tribunal in this period.

I have put together a history of my experience and summarised what I believe to be the current position. More important I have high-lighted the need for good record taking and will give an insight into some technology which may positively change aesthetic medical record taking from a VAT perspective.

Please note, BCAM cannot lawfully give tax advice. Nothing in this article can be construed as advice. Should you have genuine concerns you should seek independent professional opinion and guidance.

Background

BCAM supported a case up to tribunal level in which I was heavily involved, funding the case through BCAM, a number of interested professional parties and the Healthxchange. The interaction between HMRC and the profession's representatives lasted a number of years and was as much a discovery process for HMRC as it was for the profession. The process culminated in HMRC dropping the case just before they appeared at tribunal and agreeing that the previous ECJ ruling on the matter of medical/ VAT was clear enough to render their case before the tribunal invalid.

It is worth noting that it was only when the matter came before the lawyers for HMRC and after both parties had instructed experts that the case was dropped. HMRC tried to introduce a number of arguments which were not within the legal guidelines and eventually arguments, such as the need for a primary referral, advertising restrictions, patient's view of the purpose of the treatment, etc were set aside as not relevant.

Going forward the more senior people within HMRC are aware of the case and the law but it would appear that some individual inspectors are not as well informed. I believe it is important to respond to any approach in the correct manner focusing only on the relevant legislation and not to be side lined by criteria introduced by individual inspectors rather than the law. You should always take expert advice.

However, we know the following from the ECJ1 ruling and other settled law; (notes in brackets are by way of explanation rather than drawn form the text of the law). 

1. EU VAT law allows for the exemption from charging VAT for a service if there is a medical purpose to that service AND where such service is delivered by a healthcare professional

2. The EU list of healthcare professionals, for the purposes of the relevant law, includes doctors, dentists and nurses. (No distinction is made between doctors and nurses though there could be an expectation that all professionals work within the scope of their practice).

3. Where the purpose is 'purely' cosmetic then VAT would be chargeable for that service.

4. The ECJ has interpreted 'medical' for the purposes of this law as to include psychological and psycho-social reasons as well as preventative healthcare.

5. The ECJ considered, in determining purpose, that it was the clinician who decided if the interaction with the patient had a medical purpose or ‘purely’ cosmetic.

6. The current UK threshold for VAT registration is £85,000. (Sales of non- medical products over the counter or via a website may produce a qualifying threshold even without medical treatments being considered).

7. Even if the practitioner's business is registered for VAT, each patient treatment should be assessed on a case by case basis (as being exempt or non- exempt using the 'purely' cosmetic criteria).

]The following is opinion;

It was the reasonably held opinion of our medical experts, and that of Counsel, that the use of the term 'purely cosmetic' in the body of the relevant law was purposeful insofar as it clearly sets out a binary interpretation of a treatment....it is either ‘purely cosmetic’ with no medical element (not exempt) or a treatment with at least some part medical purpose (exempt).

In the interaction with HMRC we were able to establish that a wide range of cosmetic dermatology treatments may have a medical element to the purpose, including the more common procedures such as botox injections, IPL and the use of dermal fillers. However HMRC have stated that they would need to see some evidence of a medical element to treatment. Such evidence would be in the form of good medical records including consent and setting out a medical purpose. This purpose may be one where a cosmetic procedure is undertaken to help with a patient's underlying anxiety regarding a specific feature.

This latter demand for 'proof' of recording medical purpose has not been challenged. It would however seem a reasonable approach if the matter went to tribunal. At previous BCAM conference we have recommended that all members adopt the practice of recording the purpose of every treatment.

It is my very strong held personal opinion, having read ‘Good Medical Practice’: ref GMC, that it is unethical for a doctor to treat a patient for purely cosmetic reasons without giving regard to protecting the health of the patient. To do so would be to put the health of the patient at risk without any health gain...something which I believe our professional body would view negatively. Rather, I believe, that by adopting standards as set out in our professional guidance we will always act to protect the patient and as such the treatment will never be 'purely' cosmetic. Such an approach demands that the consultation process is at the standards of any other medical consultation, carefully establishing why the patient is seeking treatment, the psychological impact of the presenting concerns, associated physical symptoms and stating a therapeutic purpose for intervention. Such an approach will benefit patient and clinician alike.

After Brexit (if that occurs) we may well have a situation where the ECJ ruling is less helpful as the UK replaces EU VAT law. I expect the principles to remain the same as it is in the interest of society for the public to have equitable access to healthcare. However, It will be even more important to make good notes and take time understanding why the patient wishes treatment. The good news is this burden may be reduced by technological advances in Electronic Medical Record systems. Clever Clinic is a free at source APP to be launched initially to BCAM members in July 2019 and more widely after that. It will streamline and automate the consultation process, establish medical purpose, allow for audit of psychological factors, improve consenting standards and record keeping whilst hardly taking your eyes off the patient….A Game Changer?

Current Situation

I know of six clinics or individuals currently dealing with an approach by HMRC regarding medical VAT. As they approach tribunal stage it is likely an expert will be appointed to review notes to determine if there is a medical basis for treatment. This is where the case will stand or fall apart. I cannot state too strongly the importance of good medical record taking and in particular, thinking hard about the purpose and highlighting the medical/psychological benefit of treatment.

Dr John Curran

Fellow & Founder Member of BCAM

On behalf of BCAM

Many colleagues are under the impression that the question of medical VAT and aesthetic treatments is a new one. It may come as a surprise to some to hear that the British College of Aesthetic Medicine started to engage with HMRC more than 11 years ago about this complex and hugely important issue. Whilst there should be clarity, particularly as the law has not changed in that time period, many members are still the subject of challenges from HMRC. This should come as no surprise as the law allows for both circumstances where one would apply VAT and one would not for the same type of treatment depending on therapeutic gain for the patient. On the other hand, it is surprising that despite clarity from the ECJ on the matter we have yet to have affirmation at a VAT Tribunal in this period.

I have put together a history of my experience and summarised what I believe to be the current position. More important I have high-lighted the need for good record taking and will give an insight into some technology which may positively change aesthetic medical record taking from a VAT perspective.

Please note, BCAM cannot lawfully give tax advice. Nothing in this article can be construed as advice. Should you have genuine concerns you should seek independent professional opinion and guidance.

Background

BCAM supported a case up to tribunal level in which I was heavily involved, funding the case through BCAM, a number of interested professional parties and the Healthxchange. The interaction between HMRC and the profession's representatives lasted a number of years and was as much a discovery process for HMRC as it was for the profession. The process culminated in HMRC dropping the case just before they appeared at tribunal and agreeing that the previous ECJ ruling on the matter of medical/ VAT was clear enough to render their case before the tribunal invalid.

It is worth noting that it was only when the matter came before the lawyers for HMRC and after both parties had instructed experts that the case was dropped. HMRC tried to introduce a number of arguments which were not within the legal guidelines and eventually arguments, such as the need for a primary referral, advertising restrictions, patient's view of the purpose of the treatment, etc were set aside as not relevant.

Going forward the more senior people within HMRC are aware of the case and the law but it would appear that some individual inspectors are not as well informed. I believe it is important to respond to any approach in the correct manner focusing only on the relevant legislation and not to be side lined by criteria introduced by individual inspectors rather than the law. You should always take expert advice.

However, we know the following from the ECJ1 ruling and other settled law; (notes in brackets are by way of explanation rather than drawn form the text of the law). 

1. EU VAT law allows for the exemption from charging VAT for a service if there is a medical purpose to that service AND where such service is delivered by a healthcare professional

2. The EU list of healthcare professionals, for the purposes of the relevant law, includes doctors, dentists and nurses. (No distinction is made between doctors and nurses though there could be an expectation that all professionals work within the scope of their practice).

3. Where the purpose is 'purely' cosmetic then VAT would be chargeable for that service.

4. The ECJ has interpreted 'medical' for the purposes of this law as to include psychological and psycho-social reasons as well as preventative healthcare.

5. The ECJ considered, in determining purpose, that it was the clinician who decided if the interaction with the patient had a medical purpose or ‘purely’ cosmetic.

6. The current UK threshold for VAT registration is £85,000. (Sales of non- medical products over the counter or via a website may produce a qualifying threshold even without medical treatments being considered).

7. Even if the practitioner's business is registered for VAT, each patient treatment should be assessed on a case by case basis (as being exempt or non- exempt using the 'purely' cosmetic criteria).

]The following is opinion;

It was the reasonably held opinion of our medical experts, and that of Counsel, that the use of the term 'purely cosmetic' in the body of the relevant law was purposeful insofar as it clearly sets out a binary interpretation of a treatment....it is either ‘purely cosmetic’ with no medical element (not exempt) or a treatment with at least some part medical purpose (exempt).

In the interaction with HMRC we were able to establish that a wide range of cosmetic dermatology treatments may have a medical element to the purpose, including the more common procedures such as botox injections, IPL and the use of dermal fillers. However HMRC have stated that they would need to see some evidence of a medical element to treatment. Such evidence would be in the form of good medical records including consent and setting out a medical purpose. This purpose may be one where a cosmetic procedure is undertaken to help with a patient's underlying anxiety regarding a specific feature.

This latter demand for 'proof' of recording medical purpose has not been challenged. It would however seem a reasonable approach if the matter went to tribunal. At previous BCAM conference we have recommended that all members adopt the practice of recording the purpose of every treatment.

It is my very strong held personal opinion, having read ‘Good Medical Practice’: ref GMC, that it is unethical for a doctor to treat a patient for purely cosmetic reasons without giving regard to protecting the health of the patient. To do so would be to put the health of the patient at risk without any health gain...something which I believe our professional body would view negatively. Rather, I believe, that by adopting standards as set out in our professional guidance we will always act to protect the patient and as such the treatment will never be 'purely' cosmetic. Such an approach demands that the consultation process is at the standards of any other medical consultation, carefully establishing why the patient is seeking treatment, the psychological impact of the presenting concerns, associated physical symptoms and stating a therapeutic purpose for intervention. Such an approach will benefit patient and clinician alike.

After Brexit (if that occurs) we may well have a situation where the ECJ ruling is less helpful as the UK replaces EU VAT law. I expect the principles to remain the same as it is in the interest of society for the public to have equitable access to healthcare. However, It will be even more important to make good notes and take time understanding why the patient wishes treatment. The good news is this burden may be reduced by technological advances in Electronic Medical Record systems. Clever Clinic is a free at source APP to be launched initially to BCAM members in July 2019 and more widely after that. It will streamline and automate the consultation process, establish medical purpose, allow for audit of psychological factors, improve consenting standards and record keeping whilst hardly taking your eyes off the patient….A Game Changer?

Current Situation

I know of six clinics or individuals currently dealing with an approach by HMRC regarding medical VAT. As they approach tribunal stage it is likely an expert will be appointed to review notes to determine if there is a medical basis for treatment. This is where the case will stand or fall apart. I cannot state too strongly the importance of good medical record taking and in particular, thinking hard about the purpose and highlighting the medical/psychological benefit of treatment.

Dr John Curran

Fellow & Founder Member of BCAM

On behalf of BCAM