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HM Revenue and Customs Brief 16/13


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Issued 5 July 2013

VAT: Clarification of HMRC's policy on laboratory pathology services provided by state-regulated institutions

This brief provides clarification about Her Majesty's Revenue and Customs' (HMRC) policy on when laboratory pathology services are exempt from VAT.


Health professionals, hospitals, hospices, nursing homes, pathology laboratories and any other state regulated institutions providing medical care. A state regulated institution includes any provider (including companies operated for profit) which requires approval, licensing, registration or exemption in relation to those activities.


To be aware of HMRC's clarification of policy on supplies of laboratory pathology services.


As a result of the Carter report on the review of NHS outsourcing services (2006), which recommended the streamlining of NHS services, some NHS pathology services have been, or are being, outsourced to the private sector. HMRC consider that such services are exempt from VAT. Some suppliers of these services challenge that view. They think that such supplies are liable to VAT on the grounds that:

(a) they do not amount to diagnostic services, but merely provide information a third party to enable it to make a diagnosis, or

(b) the providers are not state-regulated institutions or are not making their supplies in a state-regulated institution.

HMRC'S current position

Our policy (which reflects the decision of the European Court of Justice in the case of LuP C-106/05) is that the supply of laboratory pathology services that directly relate to the provision of healthcare for individual patients is exempt from VAT. This 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.

HMRC's Notice 701/57 Health professionals and pharmaceutical products (section 2.3) explains what medical services are and which services performed by health professionals (including biomedical scientists and clinical scientists) are exempt from VAT.

HMRC's Notice 701/31 Health institutions (section 2.1) says that the exemption for care and treatment provided in qualifying institutions is exempt when either of the following conditions is met:

  • the institution is a hospital.
  • the institution is either a hospice or nursing home, and is either: approved, licensed or registered under the relevant social legislation, or exempted from obtaining such an approval or registration by the relevant legislation.

That Notice does not set out the full ambit of health institutions which HMRC consider are subject to the exemption. This Revenue and Customs Brief is designed to do this.

This Brief confirms that:

  • state-regulated pathology laboratories are 'qualifying health institutions', for the purposes of the health exemption.
  • laboratories are providing exempt medical services when their services are connected with the protection, maintenance or restoration of the health of an individual.

The Guidance will be updated to reflect this in due course.

Why are state-regulated pathology laboratories 'qualifying health institutions?'

An institution is 'state-regulated' if it is approved, licensed, registered or exempted from registration by any Minister or other authority pursuant to legislation. A pathology laboratory which is state-regulated qualifies for the purposes of the exemption irrespective of the location from which it provides its services. It makes no difference whether it occupies premises with or within a hospital or in a separate location.

When are state-regulated pathology laboratories providing exempt medical care?

Services supplied by a pathology laboratory or other similar state-registered institutions are exempt if they are:

(a) made in respect of an individual.

(b) medical services, that is, they are connected with the protection, maintenance or restoration of the health of an individual. These include, but are not necessarily limited to:

  • tests performed as part of a routine check-up to confirm whether or not an individual has been exposed to a particular virus or is suffering from a certain medical condition
  • diagnostic services or services helping another health professional or health institution to make a diagnosis
  • tests to establish the overall health of patients to ensure that they are fit enough to have an operation
  • other tests provided as part of the medical treatment of a patient

When are state-regulated pathology laboratories' services not covered by the health exemption?

Exemption does not apply when the services are not:

(a) concerned with the protection, maintenance or restoration of the health of specific patients, for example, the analysis of samples for general research purposes or for autopsies.

(b) performed primarily for the protection, maintenance or restoration of the health of the person concerned but are done solely to provide a third party with information necessary for taking a decision on non-medical matters such as insurance claims, or for legal purposes.

Making claims or adjustments

Where a business has accounted for VAT on supplies of pathology services which qualify for exemption it may make a claim to HMRC (under section 80 of the VAT Act 1994) for repayment of VAT incorrectly accounted for subject to the conditions set out in Notice 700/45 How to correct VAT errors and make adjustments or claims.

All claims are subject to the four-year time limit in section 80(4) of the VAT Act 1994 and to the set-off provisions in section 81 of the VAT Act and section 130 of the Finance Act 2008.

We may reject all or part of a claim if repayment would unjustly enrich the claimant.

More details on making claims and 'unjust enrichment' can be found in Notice 700/45 How to correct VAT errors and make adjustments or claims.

Further information

For further information and advice, please contact our Helpline on 0845 010 9000.

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Crown Copyright 2013.

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.

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Article Published/Sorted/Amended on Scopulus 2013-07-08 14:13:11 in Tax Articles

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