Independent VAT Consultant
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VAT: Botox exemption claim fails to raise eyebrows

It has always been a grey area whether some procedures carried out for medical purposes qualify for VAT exemption. Neil Warren considers the case of Skin Rich Ltd, in which a tax tribunal ruled that botox and nail fungal treatments did not qualify.

3rd Oct 2019
Independent VAT Consultant
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Woman getting ready before surgery in hospital

In order to qualify for VAT exemption, a medical service or treatment supplied to a patient needs to go past three different hurdles:

  • it is carried out by a registered health professional;
  • it is carried out in the field for which the professional is registered; and
  • the treatment is linked to the protection, maintenance or restoration of the patient’s health.


If I visit my dentist who inserts a filling in one of my teeth, this service is exempt from VAT because good teeth are an important part of my health. But if he examines my eyes during the same visit and charges me £50, this fee would be subject to VAT because he is only registered as a dentist and not as an optometrist.

Cosmetic treatment

It has always been a bit of a grey area as to whether some medical services are carried out for medical purposes (exempt) or cosmetic reasons (standard-rated).

The VAT liability of botox and other injectable treatments was one of the two key issues considered in the case of Skin Rich Ltd (TC07310).

HMRC decided that the services were standard-rated because “clients sought treatment principally for cosmetic reasons.”

Skin Rich Ltd (SRL) argued for exemption on the basis that botox is a “medical procedure” and treatments “enhance their self-confidence and influence their quality of life.”

After a very detailed analysis, the first tier tribunal agreed with HMRC that the procedures were given for cosmetic reasons and were standard-rated.

In the view of the court, “SRL has not satisfied us that the principal purpose of the injectable treatments is to protect, restore or maintain the health of the individual rather than for cosmetic reasons.”

Nail fungal treatment

How could nail fungal treatment not qualify as a medical service? The answer in the SRL case is because the treatments were not carried out by a registered health professional.

Miss Cleaver (director and company shareholder) carried out the treatments using a laser process that attacked the fungus but she was not a registered medical professional, even though SRL had a medical liability insurance policy. The taxpayer accepted this.

The alternative argument that the premises of SRL qualified for VAT exemption as a “hospital or state-regulated institution” (Item 4, Sch 9, Group 7, VATA1994) was also rejected by the court.

VAT returns

There is no doubt that HMRC put up a good performance in this case.

The VAT problem was first identified because the turnover declared on the company’s corporation tax return exceeded the sales recorded on VAT returns for the same period. The reason for this discrepancy was because the company had omitted all the sales it considered to be exempt from Box 6 of its returns. This was incorrect – all supplies of goods or services need to be included in Box 6, including those that are exempt (VAT Notice 700/12, para 3.7).

Learning points

I have always recommended that medical businesses which claim VAT exemption for their services should keep very clear and thorough client files to illustrate the medical, rather than cosmetic, purposes of the treatment. It is important to be clear that VAT exemption only applies if the ‘principal purpose’ of a process is to protect, maintain or restore good health.

If HMRC questions the VAT classification, the inspector will want to see an analysis of why VAT has not been charged. I know that doctors are often reluctant to divulge the information in these files (quite rightly) but the alternative is to probably play safe and charge 20% VAT in borderline cases.

I read that the aesthetics market in the UK is worth nearly £4bn, so it is understandable that HMRC is interested in the VAT issues. Now is definitely a good time to ensure that clients are getting things right.

Replies (7)

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By Justin Bryant
03rd Oct 2019 17:33

Very, very, very good. I am reminded of a famous PNL joke...

Thanks (2)
By Sheepy306
04th Oct 2019 00:14

Must have been difficult to maintain a stiff upper lip when the verdict was given, or not.

Thanks (0)
By Munch
04th Oct 2019 10:21

Who was advising this company!! I think some botox was injected into the grey cells. Very straightforward case and should never have been concepted as with the horrendous headline on this one.....

Thanks (1)
Replying to Munch:
By Tom Herbert
04th Oct 2019 11:09

I'll have you know I consider this headline my own personal Sistine Chapel ;-)

Thanks (1)
By rememberscarborough
04th Oct 2019 10:30

Clearly the tax man is not looking at the nature of the supply but just trying to increase revenue. When the tax treatment is different for two identical procedures then you know our tax system is broken. The same applies under CIS for cleaning the inside and outside of windows. Idiotic and pathetic!!

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By DTB27
04th Oct 2019 11:48

I have a client who provides both Aesthetic and genuine medical procedures (registered ENT consultant). When I reviewed her VAT position I was advised that it not only depends on the type of procedure that is being done but also who she contracts with as to whether the service is VAT'able or not.

She carries out genuine medical procedure to treat skin cancers, hearing impairments, etc. I was advised that if she contracts directly with the patient it is VAT exempt, but if she contracts with either an NHS hospital or BUPA/AXA PPP etc to do the same thing it is liable to standard rate VAT. If it is the same treatment being given, why the difference!!

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By Munch
04th Oct 2019 14:37

Actually, thinking on it further, my daughter is receiving orthodontic treatment from NHS. They repeatedly advised it was cosmetic and not needed (daughters teeth were badly aligned but for sure not medical issue). Therefore one assumes if we were private that would be standard rated fee.

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