VAT’s the difference between a care home and a hospital?

VAT’s the difference between a care home and a hospital?

Recently HMRC published a Revenue & Customs Brief on its policy concerning the zero-rate for new buildings intended for a relevant residential purpose as care homes. Following the First-tier Tribunal decision in Pennine Care NHS Trust HMRC has reviewed its policy on when the zero-rating is available.

HMRC makes a distinction between the construction of a hospital, which is standard rated, and a care home, which may be zero-rated. In the Revenue & Customs Brief HMRC show what it considers to be the main distinctions. These are:

Hospitals Care homes
Aim to treat patients quickly then discharge them to make space for other patients needing treatment. Allow lengthy periods of residence for individuals suffering from conditions that need longer term care.
Deal with injuries, illnesses and conditions that need medicinal or clinical intervention and rely on staff with the appropriate qualifications to carry out these functions. Provide personal care that tends to be for the purpose of enabling a person to look after themselves.

HMRC now accepts that personal care provided in a care home may include medical treatment if it is required. The difference from a hospital is that a person being cared for in a care home is usually in residence for an extended period of time.

Claims for overpaid VAT

HMRC has set out in the Revenue & Customs Brief what needs to be done where a care home operator considers it was entitled to zero-rating under the new policy. It will be necessary to recover the VAT from the supplier. The supplier will make a claim for the recovery of the VAT from HMRC. To do this the supplier will need a certificate from the care home operator that the property is to be used for a relevant residential purpose.

For help with working out whether you qualify for zero-rating in this situation get in touch.

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