doctor with ipad in hand

VAT and cosmetic surgery

Avoiding unexpected VAT costs

Jacki Wells, Director, VAT and Customs Duty Services
doctor with ipad in hand
Over the last year there has been an increase in the number of cases we’ve seen, both in the VAT courts and with our clients, where HM Revenue & Customs (HMRC) are taking the view that some cosmetic procedures, which may have historically been accepted as being exempt from VAT, are being subject to VAT at 20%.

In some cases, this has resulted in organisations who have previously treated this income as being exempt from VAT facing large VAT bills as a result of a retrospective registration requirement going back many years, potentially decades.

It should be kept in mind that there is a significant impact on pricing/margin if, going forwards, a treatment has to have VAT charged and there is also very little prospect of going back to past customers to seek additional payment if the VAT treatment is to be changed retrospectively.

Is cosmetic surgery healthcare?

The starting point is that where medical care is provided for the protection, maintenance and restoration of the health of an individual it is exempt from VAT. This is because there is a public interest in ensuring the general population have access to medical care.

In many cases it could be argued that cosmetic surgery procedures would fall into one of these categories, as the procedure is for example, treating scar tissue arising from burns or other surgery, or is aimed at improving the mental health of an individual who is struggling with certain aspects of their appearance.

We are now seeing examples of where HMRC are attempting to limit the types of procedures which qualify for exemption and exclude those where they consider that the purpose of the procedure is cosmetic. Consequently, the VAT treatment of many procedures, which may have previously been treated as exempt from VAT, is now being challenged.

HMRC’s guidance states that the VAT treatment of each cosmetic surgery procedure should be considered on its individual merits. They accept that the procedures will be exempt where they are undertaken as part of a healthcare treatment programme. In practice, to be seen as part of a healthcare treatment programme, HMRC would want to see evidence that an individual has initially held a consultation with their local General Practitioner (GP) after which a referral is made by their GP to an appropriate surgeon, who would then carry out at least one further consultation.

As many cosmetic procedures are either not available for funding by the NHS, or where funding is available, but due to lengthy waiting lists, patients may choose to refer themselves directly to a private clinic. As a result, obtaining proof of a GP referral is unlikely. Although the absence of a GP referral is not conclusive, HMRC will then look more closely at other medical records available to determine whether the procedure has been carried out for purely for cosmetic reasons. Where further medical notes are limited HMRC are likely to take the view that VAT should have been charged on the cosmetic procedures.

Recent and future HMRC challenges

There have been several cases heard by the VAT Tribunal over the last year, where HMRC have been successful in arguing that certain procedures are cosmetic and therefore should attract VAT. To date these cases have considered the VAT treatment of laser treatments, botox injections and other fillers and skin treatments. However, we are aware that HMRC are also challenging the VAT treatment of many invasive procedures which require both a surgeon and an anaesthetist to be present.

These actions follow similar challenges that were made a couple of years ago in relation to medical testing such as Covid-19 and blood testing. Whilst those medical treatments are different to cosmetic surgery the VAT treatment is governed by the same part of the law in relation to medical care services.

Points to consider

As HMRC have stated that each case should be considered on its individual merits, the impact of this is that certain procedures will be exempt from VAT, and in some cases an identical procedure, carried out on a different individual for different reasons may attract VAT. This point should be considered when drafting marketing material, for example, a website listing various procedures and the respective pricing.

Consideration should also be given to the documentation which is currently completed to establish whether this accurately reflects and provides sufficient detail to show that the procedure should be treated as exempt healthcare, rather than the procedure being carried out for cosmetic reasons.

We recommend that providers review their current position to establish whether they feel comfortable that where VAT exemption is being applied and they have the necessary documentation in place to support this, should this position be challenged by HMRC.

If you would like to discuss this further, please contact Robert Marchant, or your usual Crowe contact.

Contact us

Robert Marchant
Robert Marchant
Partner, National Head of Tax