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GPs face red tape hell over VAT rules

Changes to medical reporting for insurance companies to force GPs to register for VAT

Tax legislation that will force thousands of practices to register for VAT is set to plunge GPs into a bureaucratic nightmare.

From 1 May, much of GPs' medical reporting work for insurance companies and other third parties will become eligible for VAT.

The change comes as a result of the implementation by HM Revenue and Customs of the European Court 'd'Ambrumenil' ruling dating back to 2003.

Practices whose taxable income from medical reporting work exceeds the £61,000 threshold will eventually have to register for VAT.

Accountants estimate this will affect most practices with six partners or more – which accounts for half of UK GPs – and some with five doctors.

But the picture is complicated further by a recent UK ruling – 'Morganash' – which for the time being exempts certain parts of medical reporting work.

The result is that only the largest practices might have to register from 1 May this year, but all GPs will continually have to check whether work is VAT-able or not.

Dr Peter Holden, GPC negotiator, said that as a 'rough rule of thumb', all work that was not about care or illness prevention should be considered as being in the scope of VAT.

The Morganash ruling allowing some exemptions was likely to be overturned in 'the next year or two', he added.

Dr John Canning, chair of the BMA's professional fees committee, warned GPs would face extra work to cope with the change.

He said: 'There's going to be a learning curve for those who haven't dealt with VAT before.'

A further consequence is

the creation of a market for medical reporting work, as smaller practices that do not have to charge VAT will be able to undercut.

Dr Holden said the policy

created an 'uneven playing field', but was the best that could be expected. He said: 'Grow up – plumbers, news-agents, joiners, all sorts of people have been operating this for years.'

Dr Harry Yoxall, Somerset LMC secretary and a GP in a nine-partner practice in Taunton, said the change could dramatically cut the number of GPs willing to carry out medical reporting work.

He said: 'The whole hassle of being VAT registered and having to go through the performance of filling in paperwork is going to be a major cost so I expect some practices are going to decide they're not going to do some of the work.'

Dispensing practices already have to register for VAT.

What the new tax laws will mean

what will be VAT-able from may

• All services provided by a medical professional

that are NOT related to medical care EXCEPT access

to health records

what is exempt, initially, under the UK 'Morganash' ruling*

• Medical services to enable a life assurance provider to decide whether to accept a policy proposal

What will remain exempt from VAT

• Health screening under private medical insurance policies

• Income/credit protection insurance – medical services where the policyholder is ill, aimed at helping them back to normal life

• Motor insurance medical services to help an injured motorist return to full health/work

• Any medical service in connection with an insurance policy whose principal aim is to help restore the policyholder's health

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