VAT treatment of locum doctors: HMRC confirms revised position and refund process
25 August 2026| CATEGORIES: Uncategorised| TAGS:
HMRC has now confirmed its revised position on the VAT treatment of supplies of locum doctors, following the First-tier Tribunal’s decision in Isle of Wight NHS Foundation Trust v HMRC.
Revenue & Customs Brief 6 (2026) (“RCB 6/26”), published on 17 July 2026, confirms that supplies of General Medical Council (“GMC”) registered locum doctors may fall within the VAT exemption for the provision of a deputy for a registered medical practitioner. Importantly, HMRC accepts that the exemption can apply where locum doctors are supplied through an employment business.
The Brief provides greater certainty on which supplies may qualify for exemption, although businesses will still need to consider carefully the precise nature of the services supplied and the wider VAT consequences of changing their treatment.
Background
The issue concerns the exemption in Item 5, Group 7, Schedule 9 to the Value Added Tax Act 1994 for:
“The provision of a deputy for a person registered in the register of medical practitioners.”
Historically, HMRC had interpreted this exemption narrowly. Its position was that the exemption applied principally to deputising arrangements, such as GP out-of-hours services, and did not extend to the supply of temporary medical staff by employment businesses. Such supplies were generally treated as standard-rated supplies of staff.
This position was challenged in Isle of Wight NHS Foundation Trust v HMRC [2025] UKFTT 1114 (TC). The Tribunal found that the exemption was capable of applying to supplies of locum doctors, including where the doctors were supplied through an employment business, and was not restricted to traditional GP deputising arrangements.
In our earlier article on this issue, we considered the implications of Revenue & Customs Brief 9 (2025) (“RCB 9/25”), in which HMRC confirmed that it would not appeal the Tribunal’s decision and that it was reviewing its policy in this area.
RCB 6/26 supersedes the guidance previously set out in RCB 9/25 and provides HMRC’s updated position on both the VAT treatment of current supplies and claims relating to historic supplies.
HMRC’s revised position
RCB 6/26 now confirms that HMRC accepts that supplies of GMC registered locum doctors may fall within the VAT exemption in Item 5, Group 7, Schedule 9 to the VAT Act 1994.
Importantly, HMRC confirms that the exemption can apply where locum doctors are supplied via an employment business. This represents a significant change from HMRC’s previous policy, under which supplies made by employment businesses were generally regarded as standard-rated supplies of staff.
However, the revised position is not a blanket exemption for all supplies of temporary healthcare staff.
According to HMRC, the exemption applies only where:
- the locum doctor is GMC registered; and
- is performing medical services in that professional capacity.
The role performed must also be one that is required to be carried out by a registered medical practitioner.
The exemption does not extend to all healthcare professionals
RCB 6/26 confirms that the revised treatment applies only to registered locum doctors. It does not extend to other healthcare professionals or to general staffing services that fall outside Item 5.
HMRC specifically identifies allied health professionals, anaesthesia associates and physician associates as outside the scope of the exemption, even where they are GMC registered.
This distinction will be particularly important for employment businesses supplying a mixture of doctors and other healthcare professionals. Businesses should not assume that the VAT treatment of a supply can be determined simply by the fact that the individual is working in a healthcare environment or is professionally registered.
The precise role undertaken by the individual and whether that role must be performed by a registered medical practitioner will need to be established.
HMRC updates VAT Notice 701/57
HMRC has also updated VAT Notice 701/57, Health professionals and pharmaceutical products, with effect from 13 August 2026.
Section 6.5 of the Notice, which deals with “Supplies of self-employed locum doctors including GPs”, now directs readers to RCB 6/26 for information on the VAT liability of locum doctors.
Reclaiming VAT on previous supplies
The revised position potentially creates a significant VAT recovery opportunity for businesses that have previously charged VAT on supplies of qualifying locum doctors.
RCB 6/26 confirms that businesses may be able to claim overdeclared output tax where:
- output VAT was charged at the standard rate;
- the supplier now considers that the relevant supplies should have been exempt; and
- the supplies were made within the four-year statutory time limit.
Only the person who made the supply and accounted for the VAT can make the claim. Depending on the amount involved, the correction may be made through a subsequent VAT return or by submitting an error correction notification using form VAT652.
However, businesses should not assume that the gross amount of VAT previously accounted for will simply be refundable.
Claims will be reviewed case by case
HMRC states that claims will be considered on a case-by-case basis. In particular, HMRC will consider:
- whether repayment would result in unjust enrichment;
- the effect of the revised treatment on the supplier’s partial exemption position; and
- whether VAT has been correctly accounted for throughout the supply chain.
This is likely to be particularly relevant to employment businesses that have charged VAT to NHS bodies, private healthcare providers or other customers that may themselves have been unable to recover some or all of that VAT. The contractual arrangements and the extent to which the economic burden of the VAT has been borne by customers may therefore be important when determining both whether a claim can be made and the amount ultimately recoverable.
Partial exemption implications
The potential repayment of output VAT also needs to be considered alongside the impact on input tax recovery.
Supplies that were previously treated as taxable supplies will, under the revised treatment, be treated as exempt. This can affect the amount of input tax that the supplier is entitled to recover.
HMRC therefore specifically requires businesses to consider the effect of the partial exemption rules when calculating any claim. The amount claimed should be the net amount, after taking account of any corresponding reduction in input tax recovery.
This point was highlighted in our earlier article following RCB 9/25 and remains an important consideration for businesses assessing the financial benefit of making a historic claim. For businesses with significant overheads or a wider mix of taxable and exempt activities, the partial exemption implications could materially reduce the amount ultimately recoverable.
What should businesses do now?
Employment businesses and other suppliers of temporary medical staff should consider taking the following steps:
- Review current supplies
Identify supplies involving locum doctors and establish whether the individuals are GMC registered and performing medical services in their capacity as registered medical practitioners.
- Review the roles being filled
The exemption applies where the role being performed must be carried out by a registered medical practitioner. Businesses should therefore consider the actual role and duties of the individual, rather than relying solely on their job title.
- Separate doctors from other healthcare professionals
Supplies of other healthcare professionals are not automatically covered by the revised policy. Businesses supplying doctors alongside other medical or healthcare staff should review the VAT treatment of each category separately.
- Review historic supplies
Identify supplies of qualifying locum doctors on which VAT was charged during the previous four years and assess whether a claim for overdeclared output tax may be available.
- Calculate the net benefit
Before submitting a claim, businesses should quantify any associated input tax adjustment and consider the impact of partial exemption.
- Consider the position of customers
Businesses should establish whether VAT was charged to customers and consider the potential implications of unjust enrichment and any requirement to reimburse customers.
- Update systems and contracts
Where qualifying supplies are now to be treated as exempt, businesses should ensure that invoicing, accounting and VAT reporting systems have been updated accordingly and that future contracts reflect the agreed VAT treatment.
A welcome clarification for the medical staffing sector
RCB 6/26 provides welcome clarification following the uncertainty created by the Isle of Wight NHS Foundation Trust decision and the publication of RCB 9/25.
Businesses supplying locum doctors should therefore review their current and historic VAT treatment in light of HMRC’s revised policy and the updated VAT Notice 701/57.
RBC VAT can assist businesses in assessing the VAT liability of locum doctor supplies, reviewing historic VAT accounting and quantifying and preparing claims for overdeclared VAT.