Are you wondering whether the value-added tax (VAT) applies to cosmetic treatments? If so, read this blog till the end for complete information.
If you are working in a cosmetic clinic in the UK, you need to know all the relevant information. The HMRC imposes a different set of regulations for each industry. If you are unable to comply with these rules, you will be fined by the regulatory body. When it comes to VAT, there are different rules and regulations for each industry, and that happens to be the case for cosmetic clinics as well.
In this blog, we will try to help you understand the VAT tax for your clinic. We will start with a case study of Illuminate Skin Clinics, Ltd. This cosmetic clinic was recently taken into court by the HMRC for not paying VAT, and their case has significant implications for the industry. Then, we will tell you the rate of VAT that applies if you are running a cosmetic clinic. Read till the end!
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A Case Study of Illuminate Skin Clinics Ltd
Illuminate Skin Clinics Ltd. is a company in the UK that provides cosmetic treatments. These include aesthetic, skincare, and wellness treatments. The company registered for VAT in 2014 and deregistered in 2017. However, the problems for the company started in 2019 when HMRC announced that the company was not exempted from VAT.
The decision was made by the HMRC after a visit to the clinic in 2019. The regulatory body came to the decision that a repayment of VAT taxes paid by the company during the tax year 2012–2016 was not applicable. HMRC was of the view that the services and products provided by the company are not exempted from VAT. In response, Illuminate appealed against the decision in the First Tier Tribunal (FTT).
After a lawsuit for 4 years, the FTT gave its verdict in 2023. The judiciary body said that as the services and products provided by Illuminate do not fall under medical care, therefore the VAT is applicable. Let’s break down this decision further.
What Counts as Medical Care?
The decision was made after considering the fact that the company’s services do not fall under the umbrella of medical care. According to FTT and UK law, medical care consists of diagnosing, treating, or curing diseases or health disorders. The services provided by the clinic should have a therapeutic aim.
However, the documents that Illuminate provided to the FTT did not prove the above. According to the judiciary body, the company could not prove that the services it provided had a therapeutic aim. Therefore, the verdict was given against Illuminate Skin Clinics Ltd.
Implications for the Cosmetic Industry
This case has significant implications for the cosmetic industry, specifically cosmetic clinics. If you are providing services such as fat freezing, thread lifts, or chemical peels, you will not be exempt from VAT. In addition, clinics that provide services such as fillers, facials, and intravenous drips also do not fall under medical care. Therefore, you need to recalculate your taxes. But how much VAT will you have to pay?
What is the Standard Rate?
According to the decision given by the FTT, the standard VAT rate applies to cosmetic treatments. As of the current fiscal year, the HMRC has set the standard VAT rate at 20 percent. This means that you will be asked to pay the tax without any repayment if your services cannot be proven to fall under medical care. To stay ahead of the changing trends, you will need to recalculate your taxes and see whether you are paying enough VAT for your clinic.
How We Can Help?
We at Accotax understand that the recent decision given by the FTT has changed the dynamics. Therefore, we provide you with the best tax advisors and accountants in London. Our seasoned team of accountants understands the complex UK tax structure to help you avoid fines. By partnering with Accotax, you are always up to date with the latest trends in your industry.
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A Quick Wrap-Up
So does VAT apply to cosmetic treatments in the UK? The answer is yes, as the treatments provided do not fall under medical care. The case study of Illuminate tells us that you will have to pay VAT if you cannot prove that your services have a therapeutic aim. If you are providing services such as fillers, thread lifting, fat freezing, etc., you need to make sure that you are paying VAT. If you need help calculating your taxes, it is always better to hire a reliable accounting partner that understands UK law.
Accotax is the leading accounting agency that provides you with the best tax advice and accounting services in the UK. Partner with us, and we will help you through the tough times. Click here to get an instant quote.