Landmark VAT ruling redefines medical care in cosmetic treatments
A recent Upper Tribunal judgment has brought long-awaited clarity to the VAT treatment of medical care within cosmetic treatments, marking a significant shift for the aesthetics sector. For the first time, there is a definitive legal framework outlining when VAT exemption applies - offering reassurance and direction for many businesses. In an appeal by Illuminate Skin Clinics Limited, Mr Justice Thompsell and Judge Jonathan Cannan recognised that this was an important and difficult point and stated they “hoped the decision in the appeal would provide guidance for other businesses in the sector.”
They said: “The diagnosis by a medical practitioner of the existence, or possible existence, or specific potential future likelihood of a disease or medical disorder will usually be necessary to support the existence of a therapeutic purpose.”
As a result of the judgement, certain treatments HMRC have to date considered as being for a cosmetic purpose may now be viewed as medical, and may be exempt from VAT.
The decision, which has force of law, sets out a clear multifactorial test for establishing this and differentiates between practices run by medical practitioners and non-medical beautician businesses.
Veronica Donnelly, VAT Partner at Azets, said: “This judgement recognises that medical practitioners working in aesthetic medicine can be providing medical care and can evidence they are doing this much more easily.
It comes after more than a decade of campaigning and was a lead case with a number of additional cases relying on the result..”
The judgement was made in an appeal in relation to a First Tier Tribunal decision from 23 June 2023 brought by Illuminate Skin Clinics Limited against a decision of HM Revenue & Customs to refuse repayment of VAT and against an assessment to VAT.
Illuminate Skin Clinics Limited is run by Dr Sophie Shotter and offers a range of aesthetic skin care and wellness treatments, including treatments for collagen loss, excess fat, Botox and dermal fillers. Dr Sophie Shotter is a qualified medical doctor and is registered with the GMC.
The case has been remitted to the First Tier Tribunal for reconsideration in line with the judgement. His Majesty's Revenue and Customs (HMRC) has 30 days to apply for permission to appeal the decision.
We’re here to help
If you’re a medical professional offering cosmetic treatments, now is the time to review your VAT position in light of this ruling. VAT legislation in this area is highly complex, and small details can make a big difference. Our team has extensive experience supporting healthcare professionals with VAT compliance and can guide you through the implications of this judgement.
Please get in touch via the form below to discuss your specific circumstances with a VAT Specialist.
A full copy of the judgement is available here: Illuminate-Skin-care-v-HMRC-Decision-Final.pdf
