As with many areas of VAT, where a VAT relief applies - whether that be exemption or a lower rate - it often depends on interpretation and the specific aspects applicable to the transaction in question. In many situations, you can have the same service being supplied, but a different VAT treatment depending on the exact circumstances.
The provision of cosmetic treatment is one of many areas where this issue arises.
Quite simply, if a qualified medial professional provides cosmetic treatment to treat a medical condition (such as part of an operation, or to treat a mental health condition), then this can be exempt from VAT. However, if the treatment is for a cosmetic purpose, like someone wanting to change their appearance to appear younger or more attractive, then this will be subject to the standard rate of VAT.
In a recent Tax Tribunal case involving Skin Clinics, it was found that VAT applies to many of the cosmetic skin treatments the taxpayer provided to its clients. This case seems to have prompted HMRC into targeting the sector as a whole – likely viewing it as a potential source of quick revenue.
In defence of any challenge by HMRC to the VAT exemption, it could be argued that ‘medical care’ is being provided by improving a person’s mental health. However, in the Skin Clinics case, the Tax Tribunal dismissed this argument mainly due to a lack of diagnosis of a psychological issue, like depression, that could be resolved via cosmetic treatment.
Despite this, it’s still possible to qualify for VAT exemption. It hinges on whether there is a medical diagnosis of a health disorder that can be potentially resolved through cosmetic treatment. This position is likely to change on a case-by-case basis.
Medical professionals providing these treatments should act swiftly in order to ensure they are accounting for VAT where appropriate. It’s crucial to take reasonable care in seeking professional advice to determine the VAT treatment and have the necessary controls in place.
It’s better to ensure proactively that all processes are in order and an analysis of VAT liabilities has been performed, rather than waiting for HMRC to raise an enquiry. So if you’re a medical professional (i.e. doctor, clinic or hospital), please get in touch with our VAT Partner, Jas Dhillon (jaspaldhillon@lubbockfine.co.uk) or our VAT senior manager, Sharon Parker (sharonparker@lubbockfine.co.uk).
