Deeks VAT News Issue 60

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Welcome to this Issue of Deeks VAT Newsletter    

June 2025 issue 60 

Keeping you up to date on VAT changes        

  In this month’s newsletter we cover the following: 

Get a Drip Limited: FTT Rules Vitamin Drips and Injections Qualify as Exempt Medical Care 

NHS Ayrshire & Arran Health Board: FTT Rejects Zero-Rating for Construction Costs 

Submission of Final VAT Returns – New Regulations Provide Extension Power 

Update – VAT Notice 723A: Non-UK Business VAT Refunds 

Update – Spotlight 70: VAT Grouping Arrangements in Care Sector 

VAT on Services: Essential Knowledge for Your Business 

Input VAT: What You Can and Cannot Reclaim 

Latest From the Courts 

Get a Drip Limited: FTT Rules Vitamin Drips and Injections Qualify as Exempt Medical Care 

The First-tier Tribunal (FTT) has ruled in favour of Get a Drip Limited (GAD) in a significant VAT case concerning the classification of intravenous vitamin drips and injectable booster shots. 

Initially, GAD registered for VAT in 2017, treating their supplies as zero-rated medical goods. Following HMRC’s review and determination that the supplies should be standard-rated, GAD revised their position, arguing the treatments qualified for VAT exemption as medical care provided by registered practitioners. 

The First-tier Tribunal’s decision hinged on two key factors. Firstly, despite GAD’s website advertising specific treatments, the tribunal found that actual treatment was always based on professional assessment by qualified doctors or nurses. Secondly, the FTT determined that the services were indeed provided for therapeutic purposes, involving both diagnosis and treatment of health disorders. 

HMRC’s argument that the treatments lacked the “diagnosis, treatment or cure” element necessary for medical care exemption was rejected. The tribunal based its decision on representative product samples, despite acknowledging GAD’s inconsistent position regarding the nature of their supplies. 

Expert testimony played a crucial role in the proceedings, with HMRC ultimately withdrawing their medical expert’s evidence. While HMRC raised concerns about GAD’s expert witness, the FTT found that oral testimony adequately addressed these issues. 

This ruling provides important clarification on the VAT treatment of wellness treatments when delivered by qualified medical professionals with therapeutic intent. 

NHS Ayrshire & Arran Health Board: FTT Rejects Zero-Rating for Construction Costs 

The First-tier Tribunal (FTT) has dismissed an appeal by NHS Ayrshire & Arran Health Board regarding the VAT treatment of construction services and building materials for a National Secure Adolescent Inpatient Service (NSAIS) facility. 

In 2020, the Health Board sought non-statutory clearance to treat these construction costs as zero-rated for VAT purposes. HMRC refused this clearance, leading to the tribunal appeal which centred specifically on the Bedroom Wing of the building. 

For zero-rating to apply, the Bedroom Wing needed to qualify as a distinct and separate part of the building designed or intended solely for a relevant residential purpose (RRP). The Health Board argued that the Bedroom Wing served as a home for NSAIS patients during their stay, thus meeting the RRP criteria. 

However, the FTT sided with HMRC, noting that the definition of RRP explicitly excludes hospitals and similar institutions. The tribunal determined that the NSAIS building complex functioned as a hospital, with medical treatment—including therapeutic activities and medication—being delivered throughout the entire building, including within the Bedroom Wing. 

Critically, the FTT found that the Bedroom Wing was an “integral and inextricable part” of the NSAIS building, not a separate entity. As no part of the NSAIS building was designed or intended solely for a relevant residential purpose, zero-rating could not be applied to the construction costs. 

This ruling provides important clarification on the VAT treatment of healthcare facility construction, particularly regarding the distinction between residential and medical purposes. 

Submission of Final VAT Returns – New Regulations Provide Extension Power 

The Value Added Tax (Amendment) Regulations 2025 have introduced an important change to the VAT Regulations 1995, specifically addressing the timing of final VAT returns, accompanied by the tax and Information note. 

Previously, under regulation 25(4), businesses ceasing to be VAT registered were required to submit their final VAT return within one month of the cancellation date (with an additional week for electronic submissions). However, HMRC processing delays often made meeting these deadlines impossible, potentially exposing businesses to penalties and interest charges. 

To address this issue, HMRC had been extending submission deadlines through administrative concession. The new amendment, regulation 25(4AA), now provides a formal regulatory basis for these extensions. 

This practical change acknowledges the reality of administrative delays and provides businesses with greater certainty when deregistering from VAT. The regulations will come into force on 13 June 2025. 

For businesses planning to deregister from VAT, this change offers welcome flexibility and protection from unwarranted penalties during the deregistration process. 

HMRC Updates: 

Update – VAT Notice 723A: Non-UK Business VAT Refunds 

HMRC has updated VAT Notice 723A covering UK VAT refunds for overseas businesses. 

Key Changes 

Postal Claims Section 2.10.3 now requires document copies (not originals) with postal claims. Exception: certificates of status, as HMRC no longer returns documents. 

Electronic Claims The separate ‘Secure Data Exchange Service’ section has been removed and merged into section 2.10.1 for streamlined electronic submission guidance. 

Structure Several sections renumbered with minor wording improvements for better readability. 

Impact 

Non-UK businesses should note: 

• Submit copies only for postal claims 

• Refer to updated section 2.10.1 for electronic claims 

• Original documents will not be returned 

Updated VAT Notice 723A is available on HMRC’s website. 

Update – Spotlight 70: VAT Grouping Arrangements in Care Sector 

HMRC has issued Spotlight 70 targeting perceived VAT avoidance schemes used by state-regulated care providers. 

What is HMRC Spotlight? 

HMRC Spotlight alerts highlight tax avoidance arrangements that HMRC believes are being used to reduce tax liabilities improperly. 

The Arrangements Under Scrutiny 

State-regulated care providers are allegedly using VAT grouping structures combined with different VAT treatments to gain unfair advantages. These arrangements aim to: 

• Change VAT liability from exempt to taxable on supplies to local authorities and NHS Integrated Care Boards 

• Enable VAT recovery on costs that would normally be irrecoverable 

• Exploit differences between regulated and unregulated care provider VAT treatments 

HMRC’s Position 

HMRC considers these structures to be tax avoidance and will review all such arrangements. The department believes these schemes artificially manipulate VAT grouping rules to achieve unintended tax benefits. 

Related Guidance 

This Spotlight should be read alongside Revenue and Customs Brief 2 (2025), which specifically addresses VAT grouping use within the care industry. 

Impact for Care Providers 

Care providers using similar arrangements should: 

• Review their VAT grouping structures 

• Consider seeking professional VAT advice 

• Prepare for potential HMRC scrutiny 

Care providers with concerns about their VAT arrangements should seek specialist advice. 

VAT Articles 

VAT on Services: Essential Knowledge for Your Business 

Understanding when and how to charge VAT on services is crucial for compliance and proper business accounting. Most services are subject to the standard 20% VAT rate, including professional services, maintenance, cleaning, and IT support. However, some services qualify for reduced rates (5%) or are zero-rated for exports, whilst others like banking and medical services are exempt from VAT entirely. 

The key considerations include determining the correct VAT rate, understanding time of supply rules, and ensuring proper invoicing requirements are met. For international services, place of supply rules becomes particularly important, especially with potential reverse charge implications for business-to-business supplies. 

Read the full guide on VAT on Services Here 

Input VAT Recovery 

Input VAT: Maximising Your VAT Recovery 

Input VAT is the VAT you pay on business purchases and expenses, which VAT-registered businesses can generally reclaim through their VAT returns. You can reclaim VAT on purchases used exclusively for taxable business activities, including office supplies, equipment, professional services, and raw materials. 

However, there are important restrictions. VAT cannot be reclaimed on business entertainment, most motor car purchases, or items used for private purposes. Mixed-use items require careful apportionment between business and private use. For businesses making both taxable and exempt supplies, partial exemption rules may limit VAT recovery to a calculated proportion. 

Read the complete guide to Input VAT Here  

Need specialist VAT guidance? Contact Jane Deeks at Deeks VAT Consultancy for professional advice across all industries.

jane@deeksvat.co.uk | 07710553831 | LinkedIn