The first point to make is that if a practice only makes exempt supplies (of medical services) it is not permitted to register for VAT. Therefore we must look at the types of supplies that a practice may make that are taxable (at the standard or zero rate). If any of these supplies are made it is possible to VAT register regardless of the value of them. This is called a voluntary registration and provides the practice with the ability to reclaim, at least some, input tax. Of course, if taxable supplies are made, the value of which exceeds the current turnover limit of £73,000 pa, registration is mandatory.
Examples of services and goods which may be taxable are;
Once registered, you will be required to file a VAT return on a monthly of quarterly basis. You will have to issue certain documentation to patients/organisations to whom you make VATable supplies. You may need to charge VAT at 20% on some services. You will be able to reclaim some VAT charged to you on purchases and other expenditure. You will have to keep records in a certain way and your accounting system needs to be able to process specific information.
Only VAT incurred in respect of zero-rated and standard-rated services may be recovered. In addition, there will always be input tax which is not attributable to any specific service and is 'overhead', eg, property costs, professional fees, telephones etc. There is a set way in which the recoverable portion of this VAT is calculated.
Benefits of VAT registration
Drawbacks of VAT registration
These are some of the headline VAT issues relating to GP Practices, but your accountant should be able to provide you with some more detail and help you review your VAT position. Alternatively, Price Bailey are able to offer a VAT status evaluation audit, on request.