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Customs has set out its policy on the VAT liability of commercially provided residential care. This follows the High Court ruling in Commissioners of Customs and Excise v Kingscrest Associates Ltd on 20 March 2002 against Customs that residential care, provided in an appropriately licensed care institution, was exempt from VAT as care provided in a hospital or other similar establishment.
Customs has set out its policy on the VAT liability of commercially provided residential care. This follows the High Court ruling in Commissioners of Customs and Excise v Kingscrest Associates Ltd on 20 March 2002 against Customs that residential care, provided in an appropriately licensed care institution, was exempt from VAT as care provided in a hospital or other similar establishment.
The High Court agreed with the VAT tribunal that care provided commercially by Kingscrest in its residential homes for children and young adults with learning difficulties was not medical in nature. The exemption from VAT in United Kingdom and European Community law for care provided in hospitals and other similar establishments did not therefore apply.
Customs' view is that while the High Court's decision means that commercially provided residential care (other than nursing or medical care) does not qualify for exemption as care in a hospital or other similar establishment, it does qualify for the exemption that applies to residential accommodation. However, in order to remove any doubt about exemption for residential care, the Government has laid the Value Added Tax (Health and Welfare) Order before Parliament which, subject to Parliamentary approval, will be effective from 21 March 2002.
Residential care providers who were exempting their supplies prior to the judgment should therefore continue to do so.
(Source: Customs Business Brief 7/2002 dated 21 March 2002.)
