Pharmacy healthcare exemption extended

Pharmacy healthcare exemption extended

HMRC have announced a change for community pharmacy services. From 01st May 2023, the VAT legislation will extend the VAT exemption for healthcare, to include medical services carried out by pharmacy staff who are directly supervised by a pharmacist.

The objective is that contractors can identify the VAT status of locally commissions services where non-medically registered pharmacy staff are providing a healthcare service under the supervision of a pharmacist.

HMRC will also look to extend the zero rate on prescriptions which are supplied to patients through PDG (Patient Group Directions) later in 2023/24.

Patient Group Directions (PGDs) provide a legal framework that allows some registered health professionals to supply and/or administer specified medicines to a pre-defined group of patients, without them having to see a prescriber (such as a doctor). A typical example of a PGD is travel vaccinations, many of which are supplied free of charge via the NHS and does not require a GP appointment/prescription.  Another example could be Covid vaccines where pharmacists were as part of the roll out of the vaccination programme as hospitals, GP’s and the wider NHS.

Technical points

The law that is in play here is i) VAT Act 1994 Section 31(2) Exempt supplies and acquisitions and ii) Schedule 9 Group 7 Health and Welfare Item 3 and Note 2A.

The above pieces of legislation will be amended to extend the VAT exemption under Item 3 (Note 2A) to include services directly supervised under pharmacists.

This aligns with other aspects within this part of the legislation where certain non-medically qualified persons can be seen as making exempt supplies when operating under the direct supervision of a medically qualified person.

Objective of the change

Pharmacies can provide medical services carried out by staff who are directly supervised by a registered pharmacist and help ease the pressure on GPs and the NHS.  This will benefit public access to clinical services.

Details of the HMRC guidance can be found here.

As with all things exempt, whilst the extending of exemption to staff under the supervision of pharmacists will certainly help in better use of time within a pharmacy practice, from a VAT perspective, this will likely increase the partial exemption status of the practice.

Pharmacists tend to operate a specially agreed partial exemption calculation that takes into account the practice payment paid by the NHS/government to the practice (funding is for things like healthcare advisory services such as advice on how to stop , disposal of unwanted medicines, etc.)

The percentage split is published on the Pharmaceutical Services negotiating Committee (PSNC) website, this split only applies to the practice payment, other income such as sales from the shop of over the counter medicines or dispensing zero rated prescription contribute towards the taxable sales of the practice, balanced against the exempt healthcare activities and the mixed split of the practice payment.

Get in touch

Any change that makes a supply exempt may have an impact on the amount of input tax the pharmacy practice can reclaim.  A partial exemption calculation is a routine requirement of a pharmacy practice, it is usually good practice to review that calculation from time to time, to ensure it correctly reflects the changing activities of the is pharmacy practice over time.

Our VAT accountants have a deep understanding of VAT and have first-hand experience in dealing with HMRC on many VAT matters, knowing the their stance on various issues, and are well placed to advise you as to whether your dispute has any chance of success, and whether it is viable.

Whatever your HMRC query or concern is, our VAT team is always on hand to advise and assist you.

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