Occupational Health Services – VAT Liability Question

Thanks to Liz Maher and Louise Gray from Centurion who have raised the issue of whether VAT should be charged by providers of OH services.

At our recent Centurion Universities VAT Forum we mentioned the potential impact of a recent VAT case – RPS - on the VAT liability of supplies from Occupational Health (OH) services providers. It is a case which considers not just the liability of the services in terms of qualifying for VAT Exemption as medical but also reflects on the nature of the contractual terms that often seem to be followed in such arrangements. The taxpayer companies in this case had been treating their supplies as Standard rated for VAT purposes and it was the view of HMRC that the supplies should be VAT Exempt.

To consider the VAT Exemption the fundamental influencing aspects remain - is the supply being provided by medically registered professionals or supervised by such professionals and is the nature of the service being provided one of a medical service of diagnosis or treatment. These two aspects coming together would certainly take us in a VAT Exempt area.

However, a further point in the case related to the nature of the supply of an all-encompassing range of OH services provided to organisations often for a single contract price. Was there a range of OH services being provided – each which should be regarded as a separate and distinct supplies with its associated VAT liability or was there a single supply of multiple services? Was the contract for the provision of management information to the employer on the health and wellbeing of their employees or were these supplies of medical services to the employees themselves?

The detailed Tribunal commentary helpfully details, by service type, the VAT liabilities that the Tribunal ruled applied in the situation where individual services were specifically contracted for.  However in terms of the contractual arrangement for range of elements that constituted a supply of OH support to the business for one price, it was determined that the primary purpose of the contracts were for “the protection of the health of the employee” not management services to the employer and, whilst composed of various elements, fell to be a single multiple supply which fell into the VAT Exemption as medical services by registered professionals. To quote directly:

“In summary we found that:

1. Where RPS provides an OH practitioner to deliver a range of services for a fixed price from an onsite or mobile clinic, this is a single multiple supply;
2. Otherwise, RPS is providing separate single supplies on a bespoke basis.”

Whilst the RPS case dealt with an onsite of mobile service it would be logical to regard such a similar provision of a package of services in the same regard, irrespective of whether they were provided on-site or off-site, as it’s the nature of the service and the status of the person providing it that are the core influencing factors outside of the contractual format.

There will be variations, in contractual terms, that Universities may have with 3^rd parties in this regard – some a single combined OH Support service for a single price – others may have a pick and mix menu of OH support services each with a separate pricing. In addition elements like an OH Helpline for staff use may not always be provided by a supplier using medically registered personnel so in itself would not meet the core VAT Exemption criteria if supplied as a specifically costed element; training courses provided may fall outside of the Education Exemption.

What is clear is that the case has provided the opportunity for VAT sensitive organisations such as Universities to review their arrangements and it’s certainly an aspect that we at Centurion will be including in the reviews which we undertake for our education clients.