Employment status issues are always difficult for GP practices, not least because the onus is on them to ensure that workers are treated correctly for tax.…
VAT was introduced way back on 1 April 1973. My recollection is that it was a very good thing as it replaced Purchase Tax and as a result the cost of Subbuteo football teams fell from 52½p to 50p.
I take this trip down memory lane because it was in the Finance Act 1972 that legislation bringing the tax onto the UK statute books was introduced.
From the very start it included an exemption from VAT for healthcare activities, specifically:
‘The supply of services, and, in connection with it, the supply of goods, by a person registered or enrolled in … the register of medical practitioners’.
Over the past 47 years the VAT legislation has been through several iterations but the exemption for healthcare activities has remained essentially unchanged.
Now think about how primary care is delivered compared with nearly half a century ago.
Notwithstanding the organisational changes (some of us remember Area Health Authorities or Primary Care Trusts) the services and complexity of medical conditions and the mix of healthcare professionals providing those services is a world away from 1973.
The way the VAT legislation works is that the tax must be charged on all goods and services unless they are covered by a specific exemption.
But unless the legislation is updated to take account of the changing way primary care is delivered, VAT can end up being charged in circumstances I am sure the legislators would not have intended.
What has brought this to a head recently is the establishment of Primary Care Networks (PCNs) which are bringing in more co-operation between practices and other fundamental changes in the way primary care is delivered.
For example, imagine a lead practice wishes to recharge to the other practices in the network some of the administrative time incurred dealing with PCN matters.
This does not fall within a specific VAT exemption and so the other practices may end up having to pay the tax on the administrative cost.
Things may be different if the lead practice is already VAT registered or the PCN has been set up as a separate legal entity.
There are significant uncertainties about whether the VAT exemption applies in specific circumstances, and unnecessary time and cost is being incurred trying to arrive at the answer.
The time is well overdue for a root and branch review of how VAT applies to healthcare activities, and to bring it up to date so that it meets today’s activities and structures.
Meanwhile, does anyone want to buy some antique Subbuteo teams?