United Kingdom Removes VAT Exemption for Supplies of Medical Deputies

Summary 

• From 1 May 2027, the UK will repeal the specific exemption for providing a deputy for a registered medical practitioner. Supplies of medical staff that relied on Item 5 of Group 7, Schedule 9 of the VAT Act 1994 will become standard-rated, affecting employment businesses, NHS trusts and private providers. 

• The change preserves exemption for genuine medical care and deputising services. Classification will therefore depend on the supplier’s substantive obligation, clinical responsibility and control, not merely the worker’s medical registration or invoice description. Contracts that simply provide personnel are more exposed to standard rating than arrangements delivering patient care as. 

• Suppliers should map contracts, determine tax points spanning commencement, update pricing and invoice logic, and communicate with customers. Healthcare recipients must assess whether additional VAT is recoverable or becomes an irrecoverable cost under exemption or partial exemption. Historical refund claims under earlier guidance should be reviewed separately from the prospective. 

Extended article 

The UK will remove the specific VAT exemption for the provision of a deputy for a registered medical practitioner. Finance Bill 2026-27 will repeal Item 5 of Group 7, Schedule 9 to the VAT Act 1994, with effect from 1 May 2027. Supplies falling within that staff-supply provision will then be standard-rated. The measure follows litigation and revised HMRC guidance on locum doctors. The First-tier Tribunal decision in Isle of Wight NHS Trust supported a broader reading of the deputy exemption, and HMRC subsequently accepted that supplies of qualifying locum doctors could be exempt, including supplies through employment businesses. The 

government’s legislative response is to remove the staff-supply exemption prospectively rather than leave the broader treatment in place. The repeal does not make all medically connected services taxable. HMRC’s impact note states that genuine medical care, including deputising services, will remain exempt. The distinction therefore turns on what the supplier promises and delivers. A supplier that merely places personnel under the recipient’s direction is more likely to make a taxable supply of staff. A provider responsible for delivering patient care may still make an exempt medical service, subject to the ordinary conditions. Medical employment businesses should review every contract model, 

not only invoice wording. Relevant features include clinical responsibility, supervision, substitution rights, control, indemnities, patient relationship and whether the supplier is accountable for care outcomes. Pricing clauses must determine whether VAT can be added, particularly for contracts extending beyond 1 May 2027. NHS trusts, medical practices and private healthcare providers should quantify irrecoverable VAT and procurement effects. Partial-exemption and section 41 recovery positions may differ between recipients. Suppliers should also separate historical claims arising from prior HMRC briefs from the future standard-rating rule. Transitional provisions, tax points, credit notes and advance payments require monitoring when the Finance Bill and guidance. 

Official sources: HMRC impact note on medical deputies 

External articles: ICAEW: VAT treatment of medical staff | Albert Goodman: locum doctors and temporary staff 

---

---