As a tax adviser you have to look forwards and sideways for your clients, and well as cushioning the burden of stifling regulations, as we illustrate this week. The new dividend tax requires some predictions to assess the tax saving or cost comparing this year to next. A VAT case concerning a dental practice may be relevant to a wide range of healthcare providers. Reporting under the employment intermediaries is an unnecessary burden, but HMRC is trying to make it as easy as possible for those affected.

Dentists and VAT

Many dentists have incorporated their businesses since 2006 when the rules were changed to allow this. However, a stumbling block has often been the contract between the local NHS trust and the dentist’s firm, which may not be possible to transfer to the new company.
A solution is to run the new company alongside the old dental practice which continues to operate the NHS contract. The company employs the staff and undertakes the dental work subcontracted from the old unincorporated practice.
Dental work is classified as the provision of medical care, so is exempt from VAT under VATA 1994, Sch 9, gp 7. The new dental company should be able to rely on this exemption to avoid having to register for VAT. However, HMRC may take the view that the old dental practice is carrying on the dental work and the new company is merely providing staff, not medical care.
This was their argument in City Fresh Services Ltd, where HMRC said the company should be VAT registered. The Tax Tribunal disagreed with HMRC, saying that the legal form of the person providing the medical care is irrelevant so long as the essential nature of the supply being made does not change. The Tribunal also noted that there was no need for supplies of medical care to be made directly to the final patient.
This case is significant for any business that provides medical care or medical services via a company. Our VAT experts are happy to advise where the VAT exemption can be utilised. 

This is an
extract from our tax tips newsletter dated 6 August 2015 (5 days before we publish an extract on this blog). The newsletter
itself contained links to related source material for this story and the
other two topical, timely and commercial tax tips. It’s clearly written
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