In the case of Illuminate Skin Clinics Limited v HMRC [2025] UKUT 341 TCC, the Upper Tribunal (UT) considered whether the healthcare exemption from VAT applies to cosmetic treatment.
Much turned on whether a diagnosis was necessary for the medical exemption to apply. In short, the UT’s answer was that, while not strictly necessary, a supplier would need to offer some alternative ‘cogent’ reason as to why the treatment provided was considered to have a ‘therapeutic aim’. This would seem to track well with the definition of a diagnosis, if not quite synonymous.
Where the UT disagreed with the First-tier Tribunal (FTT) was in what could qualify as a diagnosis. The Appellant, a registered medical practitioner (MP), had taken what were described as ‘cursory’ notes in the initial consultation. The UT considered these to be evidence of a diagnosis and held that the FTT had erred in law in not placing any weight at all on the initial consultation.
It is important not to stretch this decision beyond its limits. The UT held that the FTT was wrong not to consider the consultation documents at all. Those notes were apparently a diagnosis and they should have been given some weight (not decisive in their own right) within a wider multifactorial analysis.
The UT did not hold that the exemption should apply because the initial consultation notes amounted to a diagnosis. The UT returned the case to the FTT for reconsideration: directing the FTT to consider the initial consultation notes as part of a multi-factorial analysis, including whether there was a diagnosis of a recognised medical condition.
So, is cosmetic treatment VAT exempt?
While not deciding on this specific question, the UT decision does give us helpful (if not completely new) guidance:
- If the treatment is wholly cosmetic, then it should not be VAT exempt.
- If the treatment has both cosmetic and therapeutic purposes, it is necessary to consider which of those is the primary purpose. If the primary purpose is therapeutic, only then will the supply be VAT exempt. Otherwise, it will be VATable.
To decide whether the primary purpose is therapeutic, it is necessary to conduct a multi-factorial analysis. A diagnosis will be an important part of that analysis. Other factors will include the nature of the condition, the nature of the procedure, the reasons for the patient/client approaching the MP, the way a procedure is marketed and the aim of the procedure from the MP’s perspective.
In summary, the VAT exemption may apply to cosmetic treatments depending on the circumstances, but this should be given considerable thought as it comes with significant risks. It is likely that even if it applies to some supplies made by an MP, the VAT exemption may not apply to all of the MP’s supplies.
Would you like to know more?
For more information about VAT exemptions, and specialist guidance on VAT compliance for your business, get in touch with Luigi Lungarella or send us an enquiry.
