By Simon Vincent, Senior Tax Accountant at Hive Business
We’ve written before on the topic of VAT and cosmetic treatments (particularly facial aesthetics), but a recent First Tier Tribunal (FTT) case may serve to provide some clarity on the matter.
The Skin Rich case centred around a claim by HMRC that VAT should be applied to Facial Aesthetic treatments, specifically Injectables (“Botox and dermal fillers”) as well as other cosmetic treatments.
When is a sale exempt from VAT?
It is a reasonable stance to take that a sale will incur VAT unless you can find a valid reason not to.
In this respect, there exists a specific group of VAT exemptions for healthcare services and this particular case dealt with a few specifics of the exemption. It is therefore a very useful case.
To summarise the findings, the FTT found that:
- The provision of Facial Aesthetic Injectables cannot be said to have a primary purpose of “protecting, maintaining or restoring human health” and so cannot be “medical care”;
- For the exemption to apply, such treatments must therefore be said to simply be “care or medical or surgical treatment”. The FTT agreed that this is the case.
This is a very important distinction as the latter requires that the treatment be provided by a hospital or state-regulated institution. This is where Skin Rich Ltd fell short, as they were not operating within a CQC-regulated industry.
For better or worse, dental practices are required to be registered with the CQC and so can rely on this argument to apply for the exemption.
Perhaps more importantly the FTT decision does confirm that, provided other conditions are met, aesthetic treatments can have a primary purpose of a cosmetic nature and still qualify for the VAT exemption.
Although the Skin Rich case dealt with facial and other aesthetic treatments, the principles are now enshrined in case law and apply equally to cosmetic dental treatments.
It goes without saying that the other conditions required for the healthcare VAT exemption to apply must also be met.
The benefit to dentists
Overall, this gives a clear commercial advantage over high-street competition and beauty clinics who will now have to charge VAT on similar treatments (once their total turnover exceeds the VAT threshold of £85k).
It has long been Hive’s view that cosmetic treatment, especially Facial Aesthetics carried a certain amount of risk with regards to VAT. This decision does now seem to provide some reassurance on the subject, although we would still endorse further protective action to mitigate risk in an area that HMRC are clearly focused on.
Get in touch to discuss how we can help take advantage of this and what safeguarding can be employed.