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HM Revenue and Customs Brief 12/10


HM Revenue and Customs -Tax Authorities

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Issued 18 March 2010

VAT – provision of health professionals, nursing auxiliaries, care assistants and support workers by employment businesses – clarification of policy


This brief aims to clarify our policy on the VAT treatment of supplies of health professionals, nursing auxiliaries, care assistants and support workers by employment businesses.


The Employment Agencies Act 1973 defines an 'employment business' as a 'business (whether or not carried on with a view to profit and whether or not carried on in conjunction with any other business) of supplying persons in the employment of the person carrying on the business, to act for, and under the control of, other persons in any capacity'. 'Employment' is construed widely to include engagement on a contract of employment or a contract for services.

'Health professional' is an individual enrolled or registered on the appropriate statutory register including any and all of the following:

  • Dentist or Dental Care Professional – an individual registered with the General Dental Council
  • Doctor – an individual registered with the General Medical Council
  • Nurse, midwife or community public health nurse – an individual registered with the Nursing & Midwifery Council
  • Individuals registered by the Health Professions Council – including:
    – Arts Therapist
    – Biomedical Scientist
    – Chiropodist/Podiatrist
    – Clinical Scientist
    – Dietician
    – Occupational Therapist
    – Operating Department Practitioner
    – Orthoptist
    – Paramedic
    – Physiotherapist
    – Psychologist
    – Prosthetist/Orthotist
    – Radiographer
    – Speech & Language Therapist.

'Nursing auxiliary' – an individual who is not enrolled on any register of medical or health professionals but whose duties must include the provision of medical, as well as personal, care to patients.

'Care assistant' is an individual who is not enrolled on any register of medical or health professionals but who provides both medical and personal care to the recipient.

'Support worker' is an individual providing personal care and support services that may or may not be directly connected with the welfare of the recipient.

'Medical care' – in the context of what is provided by nursing auxiliaries and care assistants, includes monitoring the health of patients, for example, by taking blood pressure and temperatures, as well as administering drugs to patients under the direct supervision of a health professional.

'Personal care' – includes washing and dressing, feeding, helping people to mobilise, bed making, toileting etc., but does not include medical care.

Employment businesses in the health and welfare sector: basic VAT position

Staff supplied by an employment business may be either employees of that business, or self-employed and engaged by an employment business. In both cases the workers’ services are provided to the employment business, which in turn makes a supply of that worker to the client. If the worker comes under the direction and control of the client, this is a supply of staff. The employment business must therefore account for VAT when appropriate on the full charge to the client as in these circumstances it is acting as the 'principal'.

However, if the employment business maintains the direction and control of its staff to make a supply of welfare or medical services directly to the final consumer, we would see it as providing health or welfare services rather than merely a supply of staff. In these circumstances, subject to relevant criteria, we would see the business as making an exempt supply of welfare or health services – see Public Notices 701/2 Welfare and 701/57 Health Professionals and the section headed 'Supplies of Contracted out Welfare Services' below.

Supplies of registered health professionals (other than nurses, midwives and community public health nurses)

When an employment business supplies registered health professionals as a principal to a third party, where the health professional is working under the control and guidance of the third party, it is making a taxable supply of staff to that third party – not an exempt supply of healthcare or welfare services. It is the third party which is responsible for providing healthcare to the final patient, rather than the business supplying the staff which has no such responsibility.

A taxable supply of staff is made even where the employment business is responsible for ensuring that the workers it provides are properly trained and qualified when they work under the control of the third party.

Supplies of locum GPs

Where an employment business supplies a locum GP to a practice, the employment business’ only responsibility is to make a taxable supply of staff to the practice, not exempt healthcare to the final patient.

Supplies of nurses, nursing auxiliaries and care assistants by state regulated agencies

The nursing agencies’ concession

By concession (HMRC regularly reviews these), nursing agencies (or employment businesses that provide nurses and midwives, as well as other health professionals) may exempt the supply of nursing staff and nursing auxiliaries supplied as a principal to a third party, if the supply is of:

  • a person registered in the register of qualified nurses and midwives maintained under article 5 of the Nursing and Midwifery Order 2001
  • an unregistered nursing auxiliary who is 'directly supervised' by one of the above, or
  • an unregistered nursing auxiliary, whose services are supplied to a hospital (NHS or private), hospice, care home with nursing under item 4 of Group 7, Schedule 9 VAT Act 1994 and form part of the care made to the patient.

The institution to which staff are supplied may be operated by a local authority, NHS body, charity or other organisation operating in the public or private sector.

To qualify for the concession, the employment business must be registered with one of the following organisations:

  • Care Quality Commission (formerly known as the Commission for Social Care Inspection)
  • Scottish Commission for the Regulation of Care
  • Care Standards Inspectorate for Wales, or
  • Northern Ireland Health and Personal Social Services Regulation and Improvement Authority.

For the supply of nursing auxiliaries or care assistants to benefit from the concession, they must undertake some direct form of medical care, such as administering drugs or taking blood pressures, for the final patient. The concession does not apply to supplies of general care assistants who are only involved in providing personal care such as catering, washing or dressing the patients or who are working in care homes without nursing where they do not require supervision by health professionals to provide their services.

However, where a state-regulated domiciliary care agency supplies the services of its care assistants directly to the final patient, we would see the agency as making an exempt supply of welfare services – see Public Notice 701/2 Welfare and the section headed 'Supplies of contracted-out welfare services' below.

Supplies of contracted-out welfare services

As is clear from above, employment businesses in the welfare sector make a taxable supply of staff to third parties, such as local authorities, if the third party is legally responsible for the onward supply of providing care to the final recipient. This is subject to the nursing agencies’ concession. The mere fact that an employment business is state-regulated does not mean that its supplies of staff are exempt if they are not covered by the nursing agencies concession.

However, when state-regulated welfare providers provide welfare services to the final consumer, these services remain exempt even if they are contracted and paid for by a local authority or other third party. For example, a local authority may contract out the provision of domiciliary care services for the elderly or disabled to a state-regulated domiciliary care agency. Although the local authority rather than the final consumer may pay the domiciliary care agency charities for the care services, for VAT purposes the care agency has still made an exempt supply of welfare services rather than staff to the local authority. This is because the care agency’s staff will still be working directly to the agency itself throughout the provision of the services rather than to the local authority.

Exemption would also apply to cases where a local authority or other body subcontracts the provision of adult placement schemes. Under these schemes a ‘worker’ provides personal care and/or support services to adults living with them or living in their own homes. Currently scheme providers need to be registered with the Care Quality Commission.

Sometimes local authorities make payments directly to people who have been assessed as needing help from social services, and who would like to arrange and pay for their own care and support services instead of receiving them directly from the local council. These arrangements are called direct payment schemes, and any welfare services provided to the recipient by a charity or state-regulated private institution or agency are again exempt from VAT.

The wording of terms and conditions of agreements

We are aware that some employment businesses state in their contract terms that their staff are still working under their control and direction rather than the third party to which their staff are being supplied. If that is the case you are no longer acting as an 'employment business' within the definition of the Employment Act 1976. You are reminded that the VAT liability of a supply is not determined conclusively by the terms of any contract or other documentation alone. If the wording of a contract does not reflect any changes in the way that the business actually operates in practice, the VAT liability of a taxable supply of staff will not change.

Correcting errors

If businesses can demonstrate that they have taken reasonable steps to follow our previous guidance and that has resulted in their applying the wrong VAT treatment then we will take that into account when considering whether any corrective action is necessary.

Further information

Our public guidance will be updated in due course. If you are unsure of the correct VAT treatment of your supplies you should consult Notice 701/57 Health professionals and/or 700/34 Staff . You may also contact our Helpline on 0845 010 9000, by email, or by writing to:

HM Revenue & Customs
National Advice Service
Written Enquiries Section
Alexander House
Victoria Avenue
SS99 1BD

Please include your VAT registration number and the name and address of your business in any correspondence.

About the Author

© Crown Copyright 2010.

A licence is needed to reproduce this article and has been republished for educational / informational purposes only. Article reproduced by permission of HM Revenue & Customs under the terms of a Click-Use Licence. Tax briefs are updated regularly and may be out of date at time of reading.

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Article Published/Sorted/Amended on Scopulus 2010-06-14 12:01:34 in Tax Articles

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