While recruitment companies usually have to charge VAT on the supply of staff to end-users, it is not straightforward with nursing staff due to a concession that is currently in place from HMRC.
The Nursing Agencies VAT Concession means that nursing agencies or employment businesses which supply certain types of nurses don’t have to charge VAT.
Only certain types of nurses are exempt, and it doesn’t apply to other medical professionals (such as doctors). The concession only applies to:
This means that other carers, who are only providing services such as washing, catering for or dressing patients, or who are working in care homes which do not require supervision by medical professionals, are not eligible for the concession.
The Nursing Agencies VAT Concession is an informal arrangement which could change at any time. Exemptions are fixed formal positions.
HMRC regularly review their extra concessions and may make changes to them at any time with little or no warning. Exemptions are reviewed less frequently.
But that doesn’t mean that HMRC will turn a blind eye to anyone seeking to exploit the concession.
Unfortunately, HMRC do not consider umbrella companies to be eligible for the concession because they don’t supply workers directly. The concession is only intended to cover the direct supply of staff by a nursing or employment agency, this is to ensure that only those who are intended to benefit, do.
This means that even when umbrella companies supply eligible nursing staff to employment or nursing agencies, they MUST apply VAT to the charges to remain compliant.
This can cause confusion for end-users who understandably anticipate their hires to be VAT exempt but then see an unexpected VAT charge on their invoice.
It also leaves agencies stuck in the middle between avoiding charging VAT to their clients, but also finding themselves liable to pay it to their umbrella companies.
Due to the recent changes in IR35, many nurses who were previously working outside IR35, through their own limited companies, are now working through umbrella companies.
When working through their own limited companies, most nurses were VAT exempt as a supplier, due to earning below the £85,000 turnover threshold. However, umbrella companies will be over that threshold and will have to charge VAT on the supply of nurses as they would charge on other staff.
Sadly, no. Where any umbrella companies advertise themselves as VAT free, they are either deliberately misleading agencies or are simply lacking in compliance understanding. Either way, if an umbrella company is not charging VAT on the supply of nursing staff and quoting the Nursing Agencies VAT Concession as a reason for this, it should raise serious concerns as to the competence of that company.
JMK can provide in-depth guidance on all matters regarding compliance, including the Nursing Agencies VAT Concession. We are accredited by Professional Passport, the compliance trade body, which demonstrates that our processes are safe for the worker and their clients.
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