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HMRC have clarified their policy on when laboratory pathology services are exempt from VAT.
The department treats as exempt NHS pathology services that have been outsourced to the private sector. Suppliers have challenged the view on the grounds they do not supply diagnostic services but provide information to a third party to enable it to make a diagnosis. Others have argued that they are not state-regulated institutions, or they are not performing services in a state-regulated institution.
HMRC have clarified their policy on when laboratory pathology services are exempt from VAT.
The department treats as exempt NHS pathology services that have been outsourced to the private sector. Suppliers have challenged the view on the grounds they do not supply diagnostic services but provide information to a third party to enable it to make a diagnosis. Others have argued that they are not state-regulated institutions, or they are not performing services in a state-regulated institution.
The Revenue says its policy applies to all businesses that are state-regulated and supply laboratory pathology testing services, whether they supply the services to the NHS or to independent hospitals.
Section 2.3 of Notice 701/57 Health Professionals and Pharmaceutical Products explains what medical services are and which services performed by health professionals, including biomedical scientists and clinical scientists, are exempt from VAT.
In light of this, HMRC confirm that state-regulated pathology laboratories are “qualifying health institutions” for the purposes of the health exemption, and laboratories are providing exempt medical services when their services are connected with the protection, maintenance or restoration of the health of an individual.
The department is set to update its guidance to reflect the position.
See Revenue & Customs Brief 16/13 for more information.
True enough, if only the government will focus more on health and exempt these services from the VAT, the health care services will be more available and accessible to those people who can't afford it. The VAT will just increase the price of these services. For example,with what you have discussed here, laboratory testing is very important because it helps in the diagnosis and prompt treatment of diseases.