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HMRC has significantly intensified its focus on the cosmetic surgery and aesthetics sector, with implications that healthcare professionals can no longer ignore. Official estimates suggest as much as £9.5bn in VAT went unpaid in 2023–24, an increase of 17% in just one year.
The Fundamental Distinction
The core issue centres on distinguishing medical treatment from cosmetic enhancement. Some cosmetic procedures, which may have been accepted as being exempt from VAT, are being subjected to VAT at 20%. While medical care provided by registered professionals for health protection, maintenance and restoration remains VAT-exempt, purely cosmetic procedures are standard-rated.
Many practitioners offering treatments like botox, dermal fillers and hair transplants have incorrectly assumed these services qualify for VAT exemption as medical care. This misunderstanding could prove costly, with businesses facing substantial retrospective VAT bills.
Compliance Requirements
The law outlines two main conditions for VAT exemption: the provider must be a registered medical professional operating in their professional capacity, and the treatment must genuinely address a medical condition rather than purely aesthetic concerns.
HMRC confirms in its guidance that it will usually treat the provision of cosmetic services as exempt from VAT if they are undertaken as an element of a health care treatment programme. However, services undertaken purely for cosmetic reasons will be standard-rated.
Risk Management
Healthcare professionals offering cosmetic services should review their VAT position as soon as possible. For unregistered businesses, HMRC can investigate historical records from day one, while VAT-registered practices face potential inspection extending back four years.
Those combining medical and aesthetic services face complexity in determining correct VAT treatment for each procedure. Early specialist advice is essential to ensure compliance and avoid potentially significant financial exposure.
Get in touch with a member of our specialist healthcare tax team to discuss your specific circumstances and ensure you’re fully compliant.