Print

HMRC have published Revenue & Customs Brief 9 (2021): ‘VAT liability of daycare services supplied by private bodies in England and Wales’ following recent Court of Appeal cases.

Background

LIFE Services Ltd (LIFE Services) provided services to individuals under a formal care plan.

The Learning Centre (Romford) Ltd (The Learning Centre) accepted individuals who had already been assessed by their local authority and had a care plan.

Neither Life Services nor The Learning Centre was regulated by the Care Quality Commission.

VAT on welfare

The provision of Welfare services by private bodies that are not charities is exempt from VAT if the body concerned is a state-regulated, private welfare institution or agency.

Court of Appeal findings

Both LIFE Services and The Learning Centre contended their supplies were exempt from VAT. HMRC’s position was that the supplies were standard rated.

In a joint appeal by LIFE Services and The Learning Centre, the Court of Appeal found that:

This affirmed the decisions of the Upper Tribunal. The Supreme Court has refused leave to appeal.

Appeals stood behind LIFE Services and The Learning Centre

HMRC will write to other appellants asking them whether they intend to proceed with their appeals, given the Court of Appeal’s judgment.

Providers of daycare services in England and Wales who are not charities

Providers of daycare services in England and Wales who are not charities and who have not accounted for VAT on the supply of these services must do so with immediate effect. 

Historic errors must also be Corrected

Scotland and Northern Ireland

Providers of daycare services in Scotland and Northern Ireland are unaffected. Daycare has been state-regulated in Scotland since 2002 and Northern Ireland since 2005.

Daycare providers in Scotland and Northern Ireland will continue to benefit from the exemption as long as they are state-regulated.

Useful guides on this topic

Health and welfare: VAT
Reduced rating, zero-rating and VAT exemption can apply to various services relating to medical care, health and welfare. This guide looks at supplies of medicines, supplies of goods and building works to disabled persons and charities, medical care, and welfare services.

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?  

External links

Revenue and Customs Brief 9 (2021): VAT liability of daycare services supplied by private bodies in England and Wales

LIFE Services Limited v HMRC and The Learning Centre (Romford) Limited v HMRC [2020] EWCA Civ 452


Squirrel ad


Are you enjoying our content? 

Thousands of accountants and advisers and their clients use www.rossmartin.co.uk as their primary TAX resource.

Register with us now to receive our unique FREE Tax Planning Tips and Advice Guide & our FREE OMB Newsletter.