Do You Charge VAT on That Report? The HMRC Rule UK Therapists Keep Missing

The rule, in one section

HMRC’s VAT Notice 701/57 sets two conditions, and both have to hold. First, “the services are within the profession in which you’re registered to practice”. Second, “the primary purpose of the services is the protection, maintenance or restoration of the health of the person concerned”.

Registration handles the first. Physiotherapists and occupational therapists are named in the Notice as professionals registered under the Health Professions Order 2001, alongside dietitians, paramedics, practitioner psychologists, radiographers and speech and language therapists.

The second condition is the one doing the work, and it is about the job rather than about you. Section 2.5 puts the point bluntly: services not aimed at the prevention, diagnosis, treatment or cure of a disease or health disorder are standard rated, and its examples are paternity testing and writing articles for journals. Neither of those stops being done by a health professional. They stop being health care.

Where your reports fall out of the exemption

Most therapists assume reports are exempt because treatment is. The Notice starts from the opposite position.

Section 4.2 is headed “Certificates and reports”, and its default is that they are standard rated, because their function is to let a third party decide something. The exceptions run the other way: a sick note is exempt, because its primary purpose is protecting the patient’s own health.

Read that again if you have been invoicing report work as exempt for years. Treatment is the exception that earns the exemption. Reports are not.

Medico-legal reports

Section 4.9 is the clearest text in the Notice. Medicals, reports and expert witness testimony for the judicial system are “liable to VAT at the standard rate”, because “the principal purpose of the services supplied is to let the court to take a decision”.

HMRC anticipates the obvious objection. Even where the court’s decision concerns the person’s wellbeing, the supply is still standard rated, because the report exists to inform the decision rather than to treat the person.

There is a footnote here that almost no clinician knows, and it cuts in your favour. The Law Society tells solicitors that where a medico-legal expert is not VAT registered, “you may treat these fees as disbursements for VAT purposes. This means that you do not have to charge VAT on these fees”, relying on Barratt Goff and Tomlinson v HMRC from January 2011. In other words, your VAT status is visible to the firms instructing you, and being outside registration is not a disadvantage in that market. It is worth knowing before you decide to register voluntarily.

Insurance work

Section 4.8 is the one people get backwards.

Insurer-commissioned medical services are exempt where the principal aim is helping to restore the person’s health. HMRC’s own examples are health screening, income protection medicals and motor insurance medicals aimed at rehabilitation. So a functional assessment written to shape someone’s rehabilitation is not automatically caught.

What is caught: medicals and reports “provided purely for the purposes of valuing policies for tax reasons”, which the Notice puts at the standard rate.

The line is the purpose. An assessment that feeds a rehabilitation plan and an assessment that feeds an underwriting decision can be the same hour of clinical work.

Occupational health, where the test cuts both ways

Section 4.11 is the section that makes the principle land.

A pre-employment medical is taxable, because it exists so an employer can make a hiring decision. A post-employment medical assessing an existing employee’s fitness for work is generally exempt, because it protects that employee’s health. In-service health screening is exempt. A workplace risk assessment is taxable. Training and advice for staff is exempt.

Same practitioner. Same clinic room. Sometimes the same physical examination. The VAT treatment flips on why the employer asked.

This is why “is my report work exempt?” is the wrong question. Nothing about your profession or your registration decides it. What decides it is who the output is for and what it is for.

The £90,000 problem

Here is where the two rules collide, and it is the part that costs money.

GOV.UK defines the number you measure against: “Taxable turnover is the total value of everything you sell that is not VAT exempt or ‘out of scope’ goods and services.” The registration threshold is £90,000 of that.

So exempt treatment income does not count. Standard-rated report income does. All of it.

Work it through. A physiotherapist bills a substantial treatment caseload, all of it exempt, and thinks of herself as running an exempt business a long way from VAT. Over two or three years she has picked up medico-legal instructions, a few insurer assessments, some pre-employment medicals for a local employer. None of it feels like the main business. It is the part she does on Fridays.

On HMRC’s reading, that Friday work may be the only part of her turnover the threshold is counting. She could be nowhere near £90,000 in her head and much closer to it in HMRC’s. The mistake compounds quietly, because it grows in exactly the part of a practice nobody tracks separately.

We are not going to tell you whether you need to register. That is a question about your numbers, and it belongs to your accountant. What we will say is that you cannot answer it at all unless your report income is a figure you can look up.

What this means for your invoice

Two practical consequences, and neither is optional if the section above applies to you.

Keep report work off the same line as treatment. An invoice that says “OT services, March” for a month containing eleven treatment sessions and one medico-legal report is unusable a year later. You cannot split it, your accountant cannot split it, and if HMRC asks, neither can you.

Make the description field carry the purpose, not just the activity. “Assessment” tells nobody anything. “Functional assessment and written report for solicitor, instructed on the date” and “Treatment session, lower back rehabilitation” are two different supplies, and the words are what makes them different on paper.

If you are registered, the VAT line follows from that split rather than sitting at the bottom as one number. If you are not registered, the split is what lets you see your report income as its own running total.

Carearoo’s invoicing is free for UK clinicians. Save your HCPC number, your address and your sort code and account number once, then keep treatment and report work as separate line items without rebuilding the document each time. Amounts in sterling, tax exempt by default for registered professionals, travel billed as you charge it, and a PDF at the end. No cost, and no card.

What actually goes on a UK therapist’s invoice

No statute prescribes this list if you are not VAT registered. It is what gets you paid and what lets you prove the work later.

• Your name and HCPC registration number. “Physiotherapist”, “physical therapist” and “occupational therapist” are protected titles regulated by the HCPC, so the number is the fastest confirmation you hold one. Instructing solicitors look for it.
• Your business address.
• An invoice number, sequential and without gaps, and the invoice date.
• The client or instructing party, which for report work is the firm or the insurer rather than the person you assessed. The person assessed goes in the description.
• A description that carries the purpose, and the service date, which is not the invoice date.
• The amount, your VAT line and registration number if you are registered, and payment details with a term you will actually chase.

When to call your accountant

Take one specific question, not a general worry: which of my supplies are standard rated under the purpose test in VAT Notice 701/57, and what is my rolling twelve-month total of those?

Bring two numbers with you. Total billings, and report and assessment billings. Most therapists cannot produce the second one, which is why the conversation usually goes nowhere.

And bring the Notice. It is public, it names your profession, and most accountants have not read it, because most of their clients are not writing statutory reports.

Frequently asked questions

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