Our client was involved in the health technology sector and had traditionally provided services on a business to business basis. It had treated all its supplies as fully taxable – and had recovered VAT on costs in full – on the basis that it was providing access to online data and remote access to GPs and other medical specialists to B2B clients. As part of its growth strategy, the client was looking to expand its offering by providing a menu of services directly to private customers on a B2C basis. The client was aware that some of its services could be seen as VAT exempt and approached us to review the VAT liability of these supplies and advise on the consequences if any services were VAT exempt.
On review, we identified that a majority of services supplied by our client to business customers were likely to be considered VAT exempt supplies of medical services. We considered that there was a risk that HMRC may consider there was a single supply of VAT exempt medical services being provided and, as a result, the VAT recovered by our client could be fully irrecoverable.
We undertook a full review of our client’s activities, considering contracts, marketing materials and speaking to employees within the business to break down all the supplies that were made within the B2B services supplied by our clients. By understanding the nature of these supplies in detail we were able to conclude that, in the event of any challenge from HMRC, there were robust arguments to support the historic treatment of the supplies by our client. The client also had a far better understanding of and comfort regarding the applicability of VAT to its business in relation to both the B2B and B2C supplies.
Key takeaways:
- Supplies of VAT exempt services by means of technology can create unforeseen VAT costs.
- haysmacintrye can undertake detailed reviews of supplies to identify risk mitigation arguments.
- Businesses that are looking to raise finance or exit should consider any VAT risks inherent in the supplies it makes in advance of any transaction process.
