Are Aesthetics Treatments VAT Exempt?
Many aesthetics practitioners would admit that the business side is their least favourite aspect. One particularly confusing area is tax and the question of whether aesthetics treatments are VAT exempt.
A recent GlowDay article on VAT in aesthetics contained some particularly useful information for practitioners.
Here we explore in further detail the basics of VAT on aesthetic treatments and what this means for your pricing strategy.
The following information is strictly for guidance purposes and is intended to give you a general idea of what is involved. It should not be considered professional tax advice. When dealing with tax issues it is always advisable to consult an accountant for the appropriate support and most up-to-date VAT information as rules in this area are constantly evolving.
What is VAT?
Firstly, it’s important to understand what exactly VAT is. VAT – value added tax – is a fee you pay when purchasing goods or services. It is charged to the consumer (buyer) not the seller.
As an aesthetics practitioner or clinic you will, therefore, need to consider VAT in terms of the tax you pay on items relating to the running of your business and the VAT charges your patient pays when purchasing products or services from you.
In the UK, the prices advertised are considered to be the VAT inclusive price – the total price the patient would pay.
Getting VAT registered
According to UK Government rules, clearly set out on its website page dedicated to VAT registration:
“You must register for VAT if your VAT taxable turnover goes over £85,000 (the ‘threshold’), or you know that it will . Your VAT taxable turnover is the total of everything sold that is not VAT exempt.”
It is crucial to note that this refers to a rolling 12 month period, not the financial year timeline.
Basically, everything you sell that is taxed should be calculated to ascertain your total turnover. You should not include any income from services that are tax exempt.
You may also register for VAT voluntarily.
Medical versus cosmetic treatments
The most important VAT rules you need to know are essentially, these:
- medical treatments are VAT exempt
- cosmetic treatments are taxed at the standard rate of VAT.
If your treatment is specifically for a medical purpose, for example, you offer botulinum toxin injections for migraine or hyperhidrosis, then those treatments are VAT exempt.
You must be able to support your claim that a specific treatment is provided on a medical basis and is, therefore, VAT exempt. You can find a list of which health-related items are currently charged zero per cent VAT, for example the dispensing of prescriptions by a registered pharmacist, or are exempt from VAT, such as the provision of “health services” by medical professionals, on the HMRC website.
The difference between a zero per cent charge and VAT exemption is that the zero rating reflects how much VAT you should charge your patients. You do not have to include VAT exempt-status items in your VAT returns but you do need to include zero-rated items.
Should you offer treatments that may benefit a patient’s well being but are cannot be proven to be for a specific medical purpose, for example soft tissue fillers for lip augmentation or botulinum toxin to correct glabellar lines, these are taxable and VAT should be charged by including it in the total treatment fee.
In the case of true medical treatments, no VAT is charged and any VAT incurred by the business in providing these treatments is unlikely to be recoverable.
For cosmetic treatments, the VAT is charged to the patient. However, some of the VAT incurred by the business in providing non-medical treatments may be able to be reclaimed by the business.
There is some debate as to this being a grey area for medical professionals, such as doctors, dentists, nurses and midwives, who practice aesthetics. The reason for this is that medical healthcare providers are deemed to be providing “healthcare” services and, as such, the supplies used in the provision of these services are deemed to be exempt from VAT.
As Veronica Donnelly, VAT Partner at Campbell Dallas, told GlowDay:
“The Law is actually more helpful and sets out a two-part test which broadly says that 1) If you are a medically qualified person on a medical register, acting within your training, experience and knowledge, and 2) you provide medical care, then your supplies are exempt from VAT. Medical care is defined in different ways but, for VAT, is generally taken to be treatment where the purpose is mainly for the protection, maintenance and restoration of health. The purpose is the important test for VAT; it is not enough to be a medical treatment – it must be a medical treatment given for medical purposes.
“If you sell products separately from any treatments, give treatments for a mainly cosmetic purpose, or give treatments where a medically registered person has not made a diagnosis of a condition before treatment commences, then these supplies will be included in your taxable income.”
Offering a mix of taxable and tax exempt services
When offering a mix of both taxable and tax exempt sales, you will fall into the partial exemption rules (VAT Notice 706) This restricts the amount of VAT that can be recovered on your costs. This is significant because any cost you cannot recover is a cost to you, reducing your profitability.
In cases where you provide aesthetic treatments that are a mix of taxable and tax exempt, it is highly advisable to speak to an accountant as this is a particularly complex area to navigate alone.
This is especially true if you work as a doctor, dentist or nurse performing medical treatments from the same premises as additional cosmetic dermatology or injectable treatments.
If you are struggling to find an accountant, this is a great question to put to your professional network. Ask your peers or put a shout out on the medical aesthetics professional networking app, Comma for personal recommendations.
Failing this, your business insurance provider should be able to point you in the right direction. You may also wish to contact Azets, an accounting firm which specialises in servicing practitioners across the aesthetics industry.
What VAT means for your pricing structure
Cosmetic injectables and skin treatments are charged at the standard rate of VAT. This is currently 20 per cent and you essentially pass this cost on to your patient by including it in the price of your treatments.
If you’re providing a mix of taxable and exempt products and services, it is advisable to review your pricing strategy. Ensure you are maximising your profit margins and offsetting any VAT you may not be able to recover due to the nature of the services you are providing.
To learn more about building your aesthetics practice, including touching on pricing strategy, our Business Marketing for Aesthetic Medicine eLearning course is a great option. It includes the basics of starting an aesthetics business, identifying your key selling points and learning how to effectively relay these benefits to potential clients.
As it’s an online course, you can take it at your own pace, fitting it in as and when suits your schedule. You’ll also have permanent access to the assets provided to you during the course, making it a fantastic reference tool to use throughout your career.
Last updated: 21 May 2021