Do cosmetic treatments qualify for VAT exemption?

Karen Brown

Karen Brown

Tax Assistant Manager

20 February 2024

The rise and prevalence of social media influencers has impacted many aspects of business, not least the beauty industry. Many are choosing cosmetic procedures to reverse or prevent the signs of aging meaning that such treatments have never been more accessible. To meet demand, increasing numbers of beauty professionals are providing such services via their own businesses.

We have assisted several businesses to determine whether such services qualify for VAT exemption. This is often considered to be the case where procedures are administered by registered and qualified medical staff. However, this alone is often not sufficient for the healthcare VAT exemption to apply. There is, in fact, another criterion which must be satisfied, which is that the services must constitute “medical care” for VAT purposes.

Medical care services are, in this context, defined as having the primary purpose of ‘diagnosing, treating, or curing diseases or health disorders; or to protect, maintain or restore the health of the individual concerned’.

HMRC has won several tribunals relating to this point - most recently the decision in the case of Ltd - primarily on the basis that sufficient records did not exist to evidence that the services satisfied the VAT definition of medical care.

On the back of such successful litigation, HMRC has formed a specialist VAT compliance unit to target the health and beauty sector. HMRC has powers to levy interest and penalties charges in relation to historical VAT liabilities arising from treating services as exempt where they should have been subject to VAT.

In our experience the behaviours of taxpayers play a significant role in mitigating such potential penalties. We suggest that businesses in the sector check their VAT positions and, if required, manage potential VAT liabilities with HMRC proactively, to mitigate the risk of penalties being applied to latent VAT liabilities.  

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Our VAT team can assist you to check the VAT position of your business and handle interactions with HMRC, if required. For more information on how your business may be impacted, don’t hesitate to get in touch with myself or a member of our specialist VAT team.

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