Aesthetic treatments are mainstream these days, with clinics popping up on every high street. If you’re an individual or business offering aesthetic treatments in the UK, it’s important to understand the tax implications of your services. You may wonder whether Value Added Tax (VAT) applies and, if so, how much.
In general, purely cosmetic treatments qualify for the standard rate VAT at 20%. Aesthetic treatments carried out by a medical professional for medical purposes are usually VAT exempt. If you offer both, then it’s important to calculate VAT proportionately.
In this blog, we’ll discuss the VAT rate for aesthetic treatment versus medical care, what the potential VAT exemptions are and what you need to know to stay compliant with HM Revenue and Customs (HMRC).
For professional VAT advice, contact AudTax. Our experienced team of accountants have an in-depth knowledge of UK tax law and can help you navigate the tricky subject of VAT.
What is VAT?
Value Added Tax (VAT) is a consumption or sales tax that is charged on most goods and services sold in the UK. The VAT charged by a business is based on the value added to goods or services at each stage of the production or delivery process.
This means that businesses must pay VAT on the materials and services they buy but can recover this from the VAT they charge on the goods or services they sell.
The standard rate of VAT in the UK is currently 20%, while some goods and services, such as food, books, children’s clothes, etc., have a reduced rate, and others, such as certain medical supplies and treatments, are exempt from VAT.
Do I need to register my aesthetics business for VAT?
If you run an aesthetic services company, when you reach the VAT threshold of £85,000 in sales in a 12-month period, then you must become VAT registered. From there on, you must start adding VAT to certain products and services, and you can claim back the VAT you pay on supplies.
You can choose to register for VAT before you reach the threshold if it is beneficial to your business. Among the advantages of doing so are that VAT-registered businesses can have more gravitas in the eyes of customers, suppliers and potential business partners.
It is wise to consult an accountant to help you register for VAT and to advise you on your new tax position.
What are the VAT rates for aesthetic services?
As a provider of aesthetic services, it’s vital to understand the tax implications of each service to avoid any penalties from HMRC.
The standard rate of VAT is 20% and applicable to most cosmetic services, but certain treatments, including medical treatments and services carried out by medical professionals, are VAT exempt.
Flat rate VAT for aesthetic treatments
If you are offering a range of non-surgical skin and body treatments such as soft tissue fillers, skincare, laser hair removal or Botox, then VAT is quite clear cut.
It is charged at the standard rate of 20%, meaning that you must calculate the VAT correctly and pass it on to your customer. It’s important to advertise the VAT-inclusive price of your services.
As a specialist accountant for aesthetic services, AudTax can advise you on how much VAT you should be charging for your services and how to calculate it.
VAT-exempt medical treatment
In the UK, most private medical care and clinical health services are tax-exempt. However, some cosmetic treatments may be VAT-exempt if they have a clinical purpose and are carried out by a medically qualified person.
To quote HMRC,
“Where the service is principally aimed at the protection, maintenance or restoration of health of the person concerned, the supply is exempt.”
So, some procedures or treatments that are carried out by a medical professional to treat a medical condition are VAT-exempt, e.g. clinical dentistry, treatments to ease the symptoms of skin diseases, mole removal or reconstructive surgery following an accident or illness.
However, it’s a complex issue, and HMRC sets out guidelines to establish which treatments are eligible for VAT exemption. Therefore, to avoid any penalties, aesthetic businesses should consult a qualified tax advisor to avoid costly mistakes.
Combined Medical and Aesthetics
If your business is one that combines medical and aesthetic services, then the situation is naturally more complicated.
For example, if you run a dental practice, your purely medical treatments (see the definition above), e.g. root canals, crowns and fillings are usually VAT exempt, while purely cosmetic procedures like teeth whitening would be subject to the flat rate of 20% VAT.
However, if a cosmetic treatment, such as veneers, is proven to have a medical purpose, this may qualify for VAT exemption.
A clinic with both types of services would therefore need to make sure each kind of treatment had the correct rate of VAT applied.
As your specialist aesthetics accountant, we can help advise you to ensure compliance with regulations.
Why are some beauty treatments VAT exempt?
There are a limited number of treatments, though usually carried out for purely aesthetic reasons, that have medical benefits, too, meaning they may qualify for VAT exemption.
For example, Botox has been used to treat migraines, hyperhidrosis and excessive sweating. So, if Botox is used as part of a health care treatment programme, it may well qualify for VAT exemption.
Are medical consultations VAT exempt?
Private medical consultation in the UK is usually tax-exempt. This exemption applies to consultation fees charged by medical professionals such as doctors, dentists, and nurses for health-related issues.
This includes diagnosis and treatment for illness, injury, or disease prevention. The exemption also extends to the advice given during the consultation, such as prescribing medication or recommending a treatment plan.
However, it is important to note that some services provided during the consultation may be subject to VAT, such as the supply of medical products like prosthetics. Medical professionals and their practices should check with their accountants if they are unsure about their VAT position.
Contact AudTax for all of your VAT requirements
At AudTax, many of our clients are in the aesthetics industry, so we have a good working knowledge of your business. That means we know the intricacies of VAT for aesthetics and can help you avoid any pitfalls.
We can take VAT registration off your hands and help you compile and file your annual VAT returns in line with Making Tax Digital. We can also provide other valuable accounting services such as bookkeeping, Corporation Tax returns and payroll.
Contact AudTax today for a free consultation.
In general, purely cosmetic treatments qualify for the standard rate VAT at 20%. Aesthetic treatments carried out by a medical professional for medical purposes are sometimes VAT-exempt. If you offer both, then it’s important to calculate VAT proportionately. You should consult a tax specialist if you are unsure of your tax position.