VAT on medico-legal work, Nov 2005: Consultant survey


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Response to the VAT Consultation set questions

This survey closed on 16 January 2006. We received 39 responses.

You can use this page to respond to the specific questions set in the Consultation Paper. All answers will be collated by us and forwarded to HM Revenue and Customs (HMRC).

It would be wise to read through the entire consultation paper and give yourself sufficient time to complete all the questions in one session, although we will attempt to combine multiple submissions made under the same name.

	Section 1: About you...

	Your name:
	Your e-mail address:
	Your telephone number:

	What percentage of your workload is expert witness work?	%

	What is your broad area of expertise?

	If this response is on behalf of a group, please tell us which group.

	Section 2: Types of work
	All primary health care is unaffected by the ECJ judgment and remains free from VAT. This includes: NHS services by doctors and other health professionals under the General Medical Services contract introduced on 1 April 2004; Primary medical care provided in hospitals and similar institutions (both NHS and private); Eye sight and hearing tests; and Dental services. However, the position is not so clear in other cases. For example, the court considered the issue of certificates for fitness to carry out a professional activity, or activities requiring a sound physical condition, which could include: Certificates of fitness to drive for the elderly Certificates of fitness to drive by those recovering from a medical condition Certificates of fitness to fly for pregnant women Certificates of fitness to fly for pilots Certificates of fitness to fly when returning home after an accident abroad. The court considered that such certificates would not qualify for exemption when they were required as a condition of allowing the person to exercise the particular activity, as the principal purpose of the service provided by the doctor is to provide the third party with the necessary information for taking a decision. However, where the purpose of the certificate is to make clear to a third party that a person’s state of health imposes limitations on certain activities or requires that they are carried out under certain conditions, then the court considered that the purpose of the certificate could be seen as protecting the health of the individual, and in such cases, exemption could apply. Hence, the liability of the supply is dependent on the principal purpose of the service provided and whether there is an element of medical care.
	Question 1 of 22 If a patient requests and pays for a report or certificate, are you generally aware of the precise reason/s for the request?


	Question 2 of 22 When providing certificates of fitness (of whatever nature), in what percentage of cases are limitations or certain conditions imposed on the activity concerned?


	Question 3 of 22 Where no limitations or conditions are imposed, are these mainly confined to particular types of certificate – for example, certificates of fitness to drive for the elderly or for pilots to fly? If so, please detail which types of certificate are concerned.

	HMRC thinks that insurance companies commission medicals only for the purpose of setting premium levels or settling claims, both of which the court has explicitly ruled to be taxable. However, they are uncertain as to whether insurance companies would commission medicals at any other time during the life of a policy and, if so, for what purpose.
	Question 4 of 22 Do insurance companies commission medicals for any reason other than for the purpose of setting premiums and settlings claims, and, if so, for what purpose?

	Rehabilitation services are provided by health professionals such as occupational therapists and physiotherapists, amongst others. They intervene at an early stage of the rehabilitation process to speed up recovery as well as providing reports to insurers who will decide the level of compensation payable. It is the belief of HMRC that the primary purpose of rehabilitation services is ‘medical care’, and that the reports are incidental. Therefore, unless the reports are made as part of a separate supply, the whole service is exempt. Is this correct?
	Question 5 of 22 Are there any occasions when you would consider that the primary purpose of the rehabilitation services provided is not that of medical care? If so, please state when and why.

	Pre-employment medicals will become taxable. Occupational health professionals, however, provide a wide range of services to employers, such as: on-site nursing services; general health and safety advice; advice on ergonomic layouts; and health and safety related risk assessments. Under the ECJ judgment the nursing services will remain exempt but it is possible that more general advice provided by a registered health professional could also be exempt from VAT where it is aimed at protecting the health of a body of people working in an office and relates directly to health matters.
	Question 6 of 22 HMRC is interested in views on whether more general advice and/or risk assessments contain a sufficient element of preventative care to be regarded as principally for the purpose of protecting, maintaining or restoring the health of individuals.

	Section 3: Quantitative information
	Question 7 of 22 How many hours a week do you or your practice (if on a practice basis, please state how many doctors) typically spend working on medical reports, certificates and blood testing for the purposes of insurance or benefit assessments, or legal proceedings?


	Question 8 of 22 How much income do you or your practice (if on a practice basis, please state how many doctors) typically get at the moment from working on medical reports, certificates, blood testing as above? (Please state whether any figures given are weekly, annual, etc.).


	Question 9 of 22 What other supplies do you make which do not involve “direct” medical/palliative care of your patients – for example, do you conduct paternity tests, forensic-type tests, do you offer expert medical opinion in court or for court cases?


	Question 10 of 22 What is your income from the supplies noted in response to question 9? (Please state whether any figures given are weekly, annual, etc., and if on a practice basis, how many doctors are included in the answer given).

	Section 4: Registration for VAT
	VAT only becomes chargeable if a health professional registers for VAT either compulsorily because his taxable turnover has reached £60,000 or voluntarily when he chooses to do so, regardless of taxable turnover. In considering whether registration will be required as a result of the ECJ ruling, account must be taken of all ‘taxable’ income, including that relating to taxable supplies which you already make but which do not, in themselves, currently place you over the VAT registration threshold. HMRC is aware that doctors in particular treat their private work for insurers and others in different ways for accounting purposes. Some doctors account for this work as individuals, and in such cases the doctor will have to undertake a significant amount of work before they have to register for VAT. However, some GP practices, in particular, set up a separate limited company to account for the private work of all the GPs in the practice and, in such cases, they will reach the VAT registration threshold much sooner. It has been difficult for HMRC to assess how many additional doctors may be required to register for VAT, and it would be helpful to know how this work is currently organised.
	Question 11 of 22 Do individual doctors predominantly account for private work on an individual or practice basis?


	Question 12 of 22 If they account for it on a practice basis, will doctors change how they account for private work as a result of the judgment?


	Question 13 of 22 As a result of the judgment, will doctors reduce the amount of the private work they do so that they do not have to register for VAT?


	Question 14 of 22 If possible, please estimate your typical existing level of annual taxable turnover. (Please state whether this is at the individual doctor or whole practice level; if at the practice level, please state how many doctors are included within any figures given. HMRC appreciates that this is a very hard question to answer, but would be grateful for any estimates or indications it might be possible to provide.)


	Question 15 of 22 As a registered health professional, would you consider applying for voluntary VAT registration because you undertake work which will become taxable as a result of this ECJ decision?


	Question 16 of 22 At present, HMRC has been using the working assumption that consultants are generally already registered for VAT. Is this the case? If so, is this because taxable turnover is generally above the current VAT registration threshold of £60,000 per annum, or is it generally a voluntary registration?

	Section 5: Regulatory impact
	As well as the VAT implications for the changes, HMRC needs to consider the regulatory impact, e.g. any additional administrative costs arising from the need to make changes to accounting systems. They are aware that some health professionals may have to register for VAT for the first time. However, they are uncertain as to whether accounting systems are already in place which may accommodate VAT and/or the liability changes readily.
	Question 17 of 22 Will you incur significant administrative costs (one-off or continuing) as a direct consequence of the proposed changes and/or having to register for VAT for the first time? If so, please explain and provide an estimate of the additional cost likely to be incurred.


	Question 18 of 22 Do you have any further comments on the regulatory impact of these changes in VAT?

	Section 6: Implementation date
	HMRC would wish to allow sufficient time for health professionals to adjust for the change in the VAT treatment of medical services. In particular because the new GMS contract only came into use this year significant changes have been made to GPs’ working practices and funding. The end of the first financial year for the contract is 31 March 2005 [We feel sure this should read 2006. Ed].
	Question 19 of 22 What would be the impact of implementing any VAT change from 1 April 2006?


	Question 20 of 22 When would be the optimum date for such a change during the financial year?

	Section 7: Transitional provision
	HMRC understands that because there is a delay in dealing with compensation claims some medical reporting companies have long-running contracts. Transitional provisions could relieve the impact of the change for them and also others in a similar position. However, to determine whether such provisions are necessary and to design appropriate measures if required, HMRC needs to have details of the types of contract that exist and when invoices are issued and payments received. They would be grateful if businesses affected by contractual delays could also identify the difficulties they face.
	Question 21 of 22 What is the number and value of long-running contracts (i.e. greater than 3 months) as at the current date (or latest figures available)?


	Question 22 of 22 What types of transitional provisions would be beneficial for ongoing contractual arrangements and how do these relate to the difficulties faced?

	Section 8: Anything else...
	Any other comments If you have any comments that haven’t already been expressed in your other answers, please give them here.

	Section 9: Send your response
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