VAT on staffing in the care sector

VAT on staffing in the care sector

Medical staff hire concession

Rob Warne, Partner, Head of VAT and Customs Duty services
VAT on staffing in the care sector

Two businesses that provided temporary nursing staff to hospitals have both recently lost their VAT cases in the High Court.


Up until 2009 employment businesses were allowed to only charge VAT on their commission and ignore the salary element of the staff being hired. This concession was subsequently withdrawn. Meanwhile under a different concession, the Nursing Agency concession, a business can (subject to conditions) treat their whole supply of hiring nursing staff as exempt from VAT.

The cases

The businesses had been applying the obsolete employment concession charging VAT only on their commission element of their invoices. HMRC subsequently assessed. The taxpayers appealed sought to have the Nursing Agency concession applied retrospectively (exempting their entire supply) but the Court ruled a different concession could not be used retrospectively and that VAT was due on the entire invoice.

Why does it matter?

For providers of exempt welfare services, VAT charged on services is a cost because the VAT cannot be recovered.

For providers of nursing staff, in order to be able to exempt their entire supply, they must ensure that all conditions to operate that concession are satisfied.  

What should be done?

Please take time to check your invoices if you receive nursing staff and other professional health staff. If the concession is being applied correctly then the entire supply should be exempt from VAT.

If you are being charged VAT only on the commission you should be contacting your supplier to confirm the basis of that charge.

As these cases prove, if the wrong concession is being applied HMRC will not allow your supplier to retrospectively apply the correct one and a retrospective VAT invoice could be issued to you.  

Care providers may wish to look at their contracts with their suppliers of staff to ensure that if they are being charged VAT, it is on the correct amount.

Please get in touch with Rob Warne, Kieran Smith or your usual VAT contact if you would like to discuss this further.

Contact us

Robert Warne
Rob Warne
Partner, Head of VAT and Customs Duty services