Change in the VAT treatment of supplies of locum medical practitioners
14 January 2026| CATEGORIES: New VAT guidance, VAT exemption| TAGS: locums, New HMRC policy, vat exemption, VAT refund
HMRC has issued Revenue & Customs Brief 9 (2025) (RCB9) following its loss in a First-tier Tribunal case concerning the VAT treatment of supplies of locum medical practitioners to the Isle of Wight NHS Trust.
Isle of Wight NHS Trust v HMRC
In this case the Isle of Wight Trust appealed against a decision issued by HMRC asserting that VAT exemption under Item 5, Group 7, Schedule 9 to the VAT Act 1994 did not apply to the supply of locum medical practitioners to the Trust. The case was designated as the lead case for a number of other recipients of locum services, the majority of which were NHS trusts.
The Tribunal held that supplies of locum doctors do fall within the VAT exemption on the basis that locum doctors act as “deputies” for registered medical practitioners. This decision rejects HMRC’s longstanding view that the exemption was limited to GP out-of-hours deputising services.
HMRC has confirmed that it will not appeal the decision and is now reviewing its policy in this area. Updated guidance is expected in due course.
Revenue & Customs Brief 9 (2025)
RCB9 sets out the circumstances in which businesses may be entitled to reclaim overdeclared output VAT on supplies of locum doctors. Suppliers should assess whether they meet the relevant conditions to submit a refund claim.
Any claim will also need to consider the potential impact on the business’s partial exemption position, as input tax attributable to exempt supplies is non-deductible. For businesses unfamiliar with partial exemption, this may introduce additional complexity into existing VAT compliance processes going forward.
What businesses need to consider
Affected businesses should consider the following:
- Customer refund requests
Suppliers may begin to receive requests from existing customers seeking refunds of VAT charged on historic supplies of locum doctors. - Application of exemption to future contracts
Customers may seek to apply exemption more robustly to new contracts. To mitigate the risk of incorrectly applying exemption, suppliers will need a clear understanding of the scope of the exemption following this judgment. This will require close monitoring of HMRC’s guidance and may necessitate specialist third-party support. - Impact on margins and pricing
VAT exemption will restrict input tax recovery, which may adversely affect margins. Existing contracts and pricing models should therefore be reviewed and updated where necessary. - Systems and processes
Billing and accounting systems will need to be updated to reflect the revised VAT treatment.
We will continue to monitor developments and provide further updates once HMRC publishes revised guidance.
Please get in touch if you would like to discuss the implications of this decision and RCB9 in more detail.
You may also find the article VAT exemption changes with locum doctors might leave recruiters out of pocket that RBCVAT contributed to on recruiter.co.uk helpful.