New changes to VAT exemptions and zero-rating for healthcare providers
Jonathan Main · Posted on: October 30th 2023 · read
HMRC has issued a recent Revenue & Customs Brief and updated their VAT guidance in VAT Notice 701/57. Further details of the changes can be found below, as well as some areas HMRC may have got wrong.
What is the change to the VAT treatment of drugs and medicines?
Revenue & Customs Brief 7/2023 published an HMRC Policy Paper on a “change to the VAT treatment of drugs and medicines supplied under patient group directions.”
What is a Patient Group Direction (“PGD”)?
The British Medical Association (“BMA”) defines a PGD as “a written instruction for the supply and/or administration of medicines by named health care professionals to groups of patients who meet the criteria specified in the PGD.” A PGD allows a healthcare professional to provide drugs to a specified group of patients without a prior prescription to a particular patient. Examples may be emergency contraception, travel vaccines, or pain relief if there is an immediate clinical need.
The Policy Paper confirms that zero-rating of prescription medicines will extend to drugs provided under a PGD if they are supplied:
- By a registered pharmacist (including a pharmacy technician in Great Britain (England, Scotland and Wales)), or
- By a General Practitioner practice where a pharmacy is too remote and dispensing is allowed under specific health provisions.
Zero-rating will apply from 9 October 2023 until 31 March 2027.
VAT Notice 701/57- Extension of the VAT exemption for pharmacy technicians
There are three changes to the VAT notice to deal with the extension of the VAT exemption for pharmacy technicians. The updated guidance is in part a failed attempt to reflect legislative changes which came into effect on 1 May 2023. The guidance states the following:
- Pharmacy technicians (only in England, Scotland and Wales) has been added to the meaning of a health professional in section 2.1 of the notice.
- Services directly supervised by a pharmacist has been removed from section 2.5 Services that are not exempt from VAT.
- Services supervised by pharmacists are now included when referring to a health professional under section 5.2 Exemption of care services performed by a person not enrolled on a statutory medical register.
What has gone wrong?
The amendment to section 2.1 detailed in Point 1 is wrong. A pharmacy technician is not a health professional within the terms of the relevant VAT legislation.
HM Treasury changed the law on 1 May 2023 to permit exemption from VAT for services supervised by clinical pharmacists, following extensive lobbying from the healthcare sector. This change did not extend to the unsupervised services of a pharmacy technician, any more than it would permit VAT
exemption for the unsupervised services of a physician associate. I suggest providers exercise care with the change to HMRC guidance, as it would be dangerous to rely on faulty guidance from HMRC.
Is everything else ok?
Points 2 and 3 above are correct, although Point 3 is nothing to do with the changes from 1 May.
Less contentious is the change to section 4.7 which confirms that fees earned by a GP for forensic physician services can be exempt if the primary purpose is the “health of the victims or perpetrators of crime”.
What does these VAT exemptions and zero-rating mean for healthcare providers?
Most of the changes are welcome extensions to the VAT reliefs in place for healthcare goods and services. Unfortunately, HMRC has made a mess of updating their guidance. Hopefully they will spot their error and make further changes soon!
