In this article, David Reaney and Emma Robinson explore the evolving area of VAT on healthcare and related treatments, in particular the increasingly blurred lines between what would be viewed as traditional medical care and an expanding range of cosmetic and other procedures.
Overview
This issue is a current hot topic for HMRC and has come before the courts on a number of occasions in recent months. These cases have considered the VAT liability of treatments in areas such as hair loss, facial aesthetics and dental procedures.
With cosmetic procedures becoming increasingly popular, the range of cosmetic and similar treatments on the market is rapidly expanding and it is an area HMRC are paying particular attention to. As a large number of businesses (including those which would have been considered traditional dental practices) are branching out to offer these procedures, it is important that the correct VAT treatment is being applied. The interaction of VAT exemption and supplies to end consumers means that getting it wrong could be costly.
Background on medical exemption
The medical exemption as set out in UK VAT law exempts the supply of services of medical care by a person registered or enrolled in a variety of registers, for example, the register of medical practitioners or the register of qualified nurses.
Therefore, generally the provision of care, medical or surgical treatment should be exempt from VAT when supplied by a registered medical practitioner. This means that no VAT is chargeable on the supply of these services however, input tax that is attributable to these supplies is generally not deductible (subject to de minimis limits).
Recent caselaw
In this article we have considered Illuminate Skin Clinics Ltd vs HMRC (UT/2023/000122) and Advanced Hair Technology Ltd vs HMRC (TC09434) due to their wider application to businesses across the sector.
Illuminate Skin Clinics Ltd has been remitted back to the First Tier Tribunal (‘FTT’) by the Upper Tribunal (‘UT’) to reconsider its decision in the light of the UT’s findings.
This clinic is privately run and provides a range of aesthetic, skincare and wellness treatments. It advertises services including, fat freezing, thread lifts, fillers and boosters (note this list is not exhaustive). The taxpayer submitted a claim to HMRC for overpaid output tax on the basis it considered its supplies were exempt from VAT under the medical exemption. HMRC disagreed and argued that the taxpayer’s supplies were standard rated.
Whilst it has been remitted back to the FTT, the UT’s decision provides some helpful general guidance in relation to how these supplies should be treated, therefore it is appropriate to consider the implications now, rather than wait for the subsequent FTT decision.
In concluding, the UT noted, ‘The supply must be made by a registered person and must have a therapeutic purpose…. Where a supply has both a therapeutic purpose and a cosmetic purpose it is necessary to identify the principal purpose. That will be a multi-factorial analysis...’
Therefore, in determining the VAT treatment that should be applied to this type of supply, a number of factors should be considered in establishing if the supply has a therapeutic purpose, a cosmetic purpose or both. This multi-factorial analysis should include consideration of the following points (quoted by the UT at paragraph 105 of its judgment):
- “any diagnosis made by the medical practitioner making the supply…;
- the nature of the disease or medical disorder which has been diagnosed;
- the symptoms exhibited by the client;
- the intrinsic nature of the procedure;
- the circumstances in which the client consulted the medical practitioner, including the context in which the supply is made and how the supply is marketed;
- the client's understanding as to the aim of the procedure; and
- the medical practitioner's understanding as to the aim of the procedure, including any prophylactic aim.”
Businesses in this sector should now assess their current VAT treatment against this multi-factorial analysis, in particular,
- who is providing the services (e.g. registered health professional),
- are the services within the profession in which the individual is registered to practice and
- is the primary purpose of the services the protection, maintenance or restoration of the health of the person concerned.
Treatment of psychological issues
One factor making this area complex is that medical care must treat psychological as well as physical issues. A presenting symptom may relate to a purely physical problem, but it may also relate to one or more underlying non-physical issues, or a combination of both. This complexity was considered by the FTT in Advanced Hair Technology Ltd.
Advanced Hair Technology Ltd treats hair loss conditions and argued that the treatments provided were VAT exempt. The FTT noted that hair loss is not a medical condition in itself but may be a symptom of a range of medical conditions. The taxpayer argued that its supplies were VAT exempt as they had a therapeutic purpose, being the treatment of psychological problems.
Despite the taxpayer’s argument, the FTT found that there were no medical findings by an appropriately qualified medical practitioner that the patients suffered from any psychological or psychiatric condition for which hair transplantation would be an appropriate therapeutic treatment, and ultimately the FTT found the taxpayer’s supplies to be standard rated.
This case highlights the importance of the therapeutic purpose and the benefit to the mental health of the individual that the procedures may have. This is essential to consider where the treatment could otherwise be viewed as a purely cosmetic procedure.
Conclusion
Helpful guidance has been provided by the UT in Illuminate Skin Clinics Ltd by way of setting out the multi-factorial assessment which should be considered for each supply, cosmetic or otherwise, a business in this sector makes to its customers.
The nature of this test and the factors to be addressed mean this assessment must be applied on a case-by-case basis, particularly as the primary purpose of the services may differ for different patients where the treatment is the same or similar.
The findings of the UT make clear that the fact that the supplies are being provided by a medical professional isn’t in itself sufficient for VAT exemption to apply and the other factors must be considered. This will be particularly important and relevant for registered doctors, nurses and dentists who have chosen to offer these cosmetic procedures to the public in addition to their core medical care services.
This article originally appeared in TaxPoint, Chartered Accountants Ireland (November 2025) and is reproduced here with their kind permission.
Get in touch
We recommend that businesses who provide any sort of cosmetic or similar treatment revisit the detail of the supplies they’re making in this area and assess these against the multi-factorial test set out above to ensure that you are treating the supplies correctly as either VAT exempt or standard rated.
Contact our Indirect Tax team for an initial conversation. We'd be delighted to hear from you.