We’d all agree that VAT isn’t the most thrilling topic. After all, it’s no Grey’s Anatomy! But when you’re placing medical staff through your recruitment agency, understanding how VAT applies can make or break your margins (and your sanity). So, we’ve provided a quick blog post to help make sense of this whole VAT-in-healthcare thing, without putting you to sleep.
In any recruitment business, if you’re placing permanent, contract or temporary staff, then VAT is usually charged at 20% on top of your fee. That’s the standard rule. (VAT Notice 700/34)
Here’s where it gets tricky – when it comes to healthcare placements, particularly in welfare or care services, the VAT gets a bit… temperamental. Many of these organisations aren’t VAT registered. Which means they can’t reclaim the VAT you would normally charge them.
So, if your invoice has an extra 20% slapped on top, that’s an actual extra cost for them, not just a bit of paper shuffling around with HMRC. Cue confused clients and recruiters with an awkward conversation to boot.
If you think you’re supplying Healthcare professionals, then your VAT is Exempt, think again. If you’re placing a brilliant candidate into a hospital on a short-term contract, then your invoice to the client needs to include VAT on the full amount.
Even though your candidates may be nurses, carers or doctors, your agency isn’t the one supervising or directing them on-site. That aspect of the job falls to the client. Since you’re not acting as a regulated health professional yourself, HMRC will see your service as ‘staffing’, not medical care. And staffing = VAT applies. End of story!
(See VAT Notice 701/57 if you really want to read more about it)
However, fear not! There is the Nursing Agency Concession — the holy grail of VAT exemptions for recruitment agencies.
Under certain circumstances, if you’re supplying:
- A nursing auxiliary, or
- A care assistant doing actual medical tasks (like giving meds or taking blood pressure)
..then that supply of that worker can be classed as VAT exempt, but only if the work being done is considered direct medical care.
To be clear, the things that don’t count are tasks like:
- General personal care (e.g. washing, dressing, serving meals)
- Work not supervised by a health professional
- “Just being in a hospital” (sadly, not enough)
An extra point for recruiters to be aware of is that umbrella companies don’t qualify for the concession. This means if you use one, then they’ll charge you VAT to your agency, and you won’t be able to reclaim it, meaning you’re stuck with the extra 20% cost.
If your placement is going to fall under the Nursing Agency Concession, the candidate should be paid via your in-house PAYE scheme. So, it’s PAYE or pay up!
It’s so important to understand that VAT in the healthcare recruitment world is more than just an HMRC box-ticking exercise. It can seriously impact your pricing, your client relationships, and your bottom line.
At MAYACHI, we help healthcare recruiters to understand the financial impact decisions like this will have on their business and bottom line. To find out more, why not book onto a 2-hour free meeting?
