There have been some recent developments in VAT that may affect certain care sector providers. This alert gives a brief overview of the issues.
There has been recent litigation in the High Court in relation to the supply of temporary nursing staff by employment agencies where VAT was incorrectly not applied to the full amount charged. Please see our full insight for further information.
We have also seen a number of instances recently where providers of temporary staff have sought to charge VAT retrospectively following an HMRC inspection. Therefore, it is important that care businesses ensure that where VAT is being relieved the relevant conditions are met.
Finally, it is also worth noting that care businesses can protect themselves from retrospective VAT charges by ensuring that prices stated in contracts are inclusive of VAT.
HMRC has released its business brief 09/21.
The brief confirms that HMRC will apply VAT at the standard rate to supplies of care made by profit making entities that are not regulated because the conditions for applying VAT exemption are not met. Read our insight for further information.
This case supports those care providers that are using unregulated wholly owned subsidiaries in order to apply VAT to services to improve VAT recovery. Read our insight for further information.
The construction of a new care home is zero-rated providing a number of conditions are met. Those conditions cover both the use of the building and in some instances the design and the building’s proximity to existing any existing ‘care home’ buildings.
Care providers have to provide builders / vendors of the buildings with certification in order for the zero-rate to be applied and in some instances 100% penalties can apply for incorrectly issuing certificates. Therefore, it is important to act diligently when making such declarations as the rules are relatively complex.
The rules can become even more complex when the transactions amount to sale and leaseback arrangements (which are often used for funding purposes). The recent decision in Balhousie Holdings Limited supported the taxpayer's zero-rated treatment which represents good news for taxpayers. For more information read our insight on Balhousie.
Please get in touch with Rob Warne, Kieran Smith or your usual VAT contact if you would like to discuss this further.