VAT on Care Services

VAT - Adults with Disabilities

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I have a Care Home client that was eagerly awaiting the decision in LIFE Services vs HMRC. HMRC argued that day care was standard rated due to LIFE being a profit making company rather than a charity. HMRC lost in FTT as UK law 'offended' EU Law in terms of fiscal neutrality i.e. a compay should not be treated different to a charity.

So....all seemed OK.....however a competitor provider has written to all of their customers advising that they've had a HMRC inspection and been told to start charging VAT from a specific date later this year. They sent this letter out even after LIFE won the Tribunal hearing.

Does anyone here act for any care homes, or could anyone shed any light why they would do this, and what are other care homes doing in the wider community?

 

Thanks for any help!

Replies (4)

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chips_at_mattersey
By Les Howard
19th Aug 2016 16:05

HMRC may or may not accept the decision of the Tribunal. They may also argue that the nature of the care provided is different, and would mean the services fall outside the exemptions.

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Replying to leshoward:
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By fellowcraft
22nd Aug 2016 15:17

Thanks. So what would be the sensible way forward here?

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chips_at_mattersey
By Les Howard
23rd Aug 2016 16:12

It depends on the Client's approach to risk.
Also, on how he is funded: is he a NPM? Are his residents privately or local authority funded?
Does he want to start charging VAT, and risk being unable to recover potentially over-charged VAT under the unjust enrichment rules?
Or will he treat his supplies as exempt, and risk an HMRC intervention?

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Replying to leshoward:
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By fellowcraft
01st Sep 2016 21:22

Thanks Les

NPM = Non Profit Making? If yes, then no as it's a normal profit making company.

Local Authrity funded. The LA's pay money into a bank account under the control of the customer, who then pay the care home. I understand this is the done thing, and is to give the person a sense of control and responsibility. If the customer was actually the LA then no problem as they could recover the VAT!

The customer doesn't want to risk charging VAT, then be unable to recover it later, but conversely they don't want to not charge VAT and end up with a huge bill.

They want to do things properly and correctly, however I just cannot find out what is 'proper and correct' given that the UK law which HMRC uses conflicts with EU law.

A competitor has recently decided to start charging VAT after a HMRC inspection, which is surprising given that HMRC lost at the FTT. I'm at a loss what to do.

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