In an update to the VAT rules, HMRC has revised its position on the VAT treatment of the supply of temporary medical staff, specifically locum doctors, following the First Tier Tribunal decision in Isle of Wight NHS Trust v HMRC [2025].
Previously, HMRC maintained that only traditional deputising services, such as out-of-hours GP cover, were eligible for VAT exemption under Item 5, Group 7, Schedule 9 of the VAT Act 1994.
However, this tribunal’s ruling challenges this interpretation, confirming that the VAT exemption applies to the supply of locum doctors, including those supplied by employment agencies for temporary staffing to fill vacancies or designated roles.
This clarification has significant implications for healthcare providers and employment agencies who supply locum staff, as it now offers an opportunity to claim a refund on VAT previously overpaid.
With this change in HMRC’s stance, healthcare providers that have supplied locum doctors and charged VAT at the standard rate can now review their previous VAT returns to determine if they overpaid VAT on those services.
Restrictions on previously claimed input tax however does also need to be considered when making any calculations.
The supply of locum doctors, provided they are filling a designated role usually held by a registered medical practitioner, is now deemed exempt from VAT.
HMRC has confirmed that they will publish further guidance in due course, but for now, businesses should act swiftly to assess their VAT records.
This is an opportunity for healthcare providers and employment businesses to correct past declarations and reclaim VAT that should not have been charged which is time limited.
For businesses that have been supplying locum doctors, this change presents an opportunity to recover significant sums of VAT.
Our team can assist with the process and ensure your business is compliant with the new rules. Contact our VAT experts today to discuss how we can help you take advantage of this important change.
