Here we unpick and simplify the world of tax for Aesthetic Practitioners in 7 easy points – and it may well be the most important thing you read today!
The majority of Aesthetic Practitioners are paying too much tax, mainly because the business administration side of their work is the area they enjoy the least – but ignoring your tax and VAT entitlement could be costly. As a specialist in aesthetic tax, I have put together this easy 7 point guide, covering the questions I most commonly get asked.
This article is only for guidance – we would always recommend getting specialist accountancy advice, as this is the quickest way to save you money and time.
1. The basics: What is VAT?
VAT stands for Value Added Tax, which is charged on almost all goods and services sold by VAT registered businesses. The standard rate of VAT is 20%. For Aesthetic Practitioners, this is the tax you add to your services to be paid by your patients.
For aesthetic services in the UK, this VAT amount is usually included in the price listed for treatments. So, for example, if treatment was £800, the VAT (20%) is £200 – the list price your patients see would be £1000.
2. Who should get VAT registered?
Any UK business that earns a taxable turnover over £85,000 must register for VAT. This ‘taxable turnover’ is the total of everything sold that isn’t tax-exempt.
Three things to know:
- this taxable period is a rolling twelve-month not confined to the financial year – meaning that the £85,000 threshold mustn’t be exceeded in any rolling twelve-month timeframe.
- You can voluntarily sign up for VAT, whatever your turnover – although the admin alone usually dissuades most from doing this.
- You only include taxable services and products in these VAT calculations. Not those exempt – which is key to the aesthetics sector and brings us neatly to the next point.
3. Which aesthetic services are tax-exempt?
In a nutshell, there are just two essential VAT rules aesthetic professionals need to know:
- Medical treatments are VAT exempt.
- Cosmetic treatments get taxed at the standard 20% VAT rate.
An example could be that two patients (A & B) want jawline slimming injections for aesthetic reasons. Patient ‘A’, however, suffers from teeth grinding and headaches; patient B does not. In this scenario, potentially, a medical need could be attributed to patient ‘A’, so this treatment would be tax-exempt (you would need to provide evidence of this), whilst patient B’s treatment would be purely cosmetic and therefore taxable at the standard VAT rate.
You can find a list of VAT exempt services on the HMRC website. These include ‘health services’ delivered by Medical Professionals and prescriptions dispensed by registered pharmacists.
4. How do VAT exemptions get filed?
When you register for VAT, you must submit a VAT return to HMRC detailing how much you owe. Periodically, you can expect a visit from HMRC to ensure you are paying the correct amount – which is why record-keeping is essential.
5. Who qualifies as an Aesthetic Medical Professional for VAT exemption?
This question sits within a grey area. For example, could a midwife – who is a Medical Professional, start practising aesthetics and benefit from VAT exemption on certain treatments, even though this is not their specialism?
The answer is no. To qualify for medical VAT exemption, you should be a Medical Professional practising in your field of specialism. So, a dentist applying injectable lip fillers would not be eligible for VAT exemptions on these treatments, so VAT at 20% should be charged.
6. What treatments qualify as medical care for VAT exemption?
For VAT, the definition of medical care relates only to services where an aesthetic treatment is carried out for medical purposes – treatments that protect, maintain or restore health for your patient’s physical or psychological medical wellbeing.
7. The importance of record keeping.
It is vital to keep case-by-case records for each patient – you will need medical evidence if you are applying for VAT exemptions – so your records need to be accurate & detailed and ready for VAT inspections.
I hope you have found this informative. However, we recommend you get specialist tax accountancy advice to make sure you’re following the regulations and maximising your profits.
We are Specialist Tax Advisers to Aesthetic Practitioners across the UK. If you have any questions, get in touch, we’d be delighted to advise you.
By Andrew Fenton: Medical Tax Specialist at AF Tax Solutions Ltd