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image of woman having skin treatment | accountingweb | Medical exemption for VAT did not apply to cosmetic treatments
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Skin clinic’s appeal turns ugly for HMRC

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A nurse running a cosmetic clinic did not qualify for medical exemption for VAT, but HMRC lost the case because its assessment was out of time due to a system error.

16th May 2024
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HMRC’s computer systems may have cost it more than £200,000 following a recent decision of the first tier tribunal (FTT). In Gillian Graham vs HMRC [2024] UKFTT 352 (TC), the taxpayer was a registered general nurse (RGN), specialising in disorders of the skin. The taxpayer operated a clinic where she would diagnose clients with skin conditions and offer treatments. 

Following correspondence in 2017, HMRC formally notified the taxpayer on 17 January 2018 that she had been registered for VAT with effect from 1 May 2007 (although the effective date of registration was later revised to 1 November 2007). The taxpayer appealed on the grounds that her services were exempt medical care.

On 7 September 2018, HMRC issued a best judgment VAT assessment for £270,648.91 (the prime assessment) for the period ending 28 February 2018, against which the taxpayer also appealed. However, the appeal date, which was originally scheduled in 2020, was delayed due to the pandemic. 

Subsequently, the taxpayer submitted a nil return on 27 October 2020. According to HMRC, this resulted in the prime assessment being automatically cancelled by its electronic system. Consequently, HMRC issued a new assessment on 18 March 2021 (the 2021 assessment) for £212,897. The taxpayer appealed again.

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Replies (5)

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By cbp99
16th May 2024 14:00

In the light of MTD, an interesting example of the failure of a digital system of HMRC's design.

Thanks (3)
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By FactChecker
16th May 2024 15:54

"Subsequently, the taxpayer submitted a nil return on 27 October 2020. According to HMRC, this resulted in the prime assessment being automatically cancelled by its electronic system."

I feel some interesting experiments are about to be started (not at my suggestion I hasten to add), where in multiple tax spheres the same approach of 'wiping clean the past' is tried ...

Thanks (2)
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By Paul Crowley
17th May 2024 11:00

HMRC are lucky
Ant tax advisor being this incompetent in looking at dates would be paying out on a negligence clam.

Thanks (2)
Replying to Paul Crowley:
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By richard thomas
17th May 2024 20:50

HMRC lucky? Or the taxpayer being faced with such incompetence?

Thanks (1)
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By the_Poacher
20th May 2024 16:03

Could this have been an MTD [***] up?

Thanks (0)