HMRC have published 'Revenue and Customs brief 9 (2025): VAT liability of the supply of temporary medical staff', which confirms that supplies of locum doctors qualify for the VAT exemption under Item 5, Group 7, Schedule 9, VAT Act 1994.
Brief 9 (2025) follows the First Tier Tribunal (FTT) decision in Isle of Wight NHS Trust v HMRC [2025] TC09640, in which the FTT found that VAT exemption applied to supplies of staff, not just the supply of medical care. It also found that the exemption applied to locum doctors, including those provided by employment businesses and was therefore not limited to out-of-hours GP cover.
Item 5, Group 7, Schedule 9, VAT Act 1994, exempts “The provision of a deputy for a person registered in the register of medical practitioners”.
HMRC have not appealed against this decision and are now reviewing policy in this area and will publish updated guidance in due course.
The brief also provides guidance for anyone who wants to claim a refund of overdeclared output tax following the decision.
Businesses that made supplies of staff and charged output tax may be able to claim a refund if all of the following apply:
- The supply was of locum doctors.
- Output tax at the standard rate was charged.
- The supplier now considers that the supply should have been exempt from VAT.
- The supply was within the last four years.
To claim the refund, HMRC’s Error Correction procedure should be followed.
The affected supplies would previously have been treated as taxable supplies, but are now treated as exempt. This means suppliers will need to consider the impact on the associated input tax that was recovered on previous VAT returns. Partial exemption calculations may also be affected.
Refund claims should be adjusted for any input tax disallowance adjustments.
Useful guides on this topic
Correcting VAT errors
What are the VAT error correction time limits? Can you correct errors through the VAT return? Do you have to notify HMRC?
Health and welfare: VAT
When do reduced rating, zero-rating and VAT exemption apply to services relating to medical care, health and welfare? What are the rules?
Partial exemption and input VAT
How do you calculate the amount of input tax you can recover under the VAT partial exemption rules? What are the de minimis rules?
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