The management work of clinical directors of the NCP could be subject to VAT


Management work carried out by NCP clinical directors could be subject to VAT, HMRC has confirmed to the Association of Independent Specialist Medical Accountants (AISMA).

This could mean that some NCP budgets are cut by 20%, according to AISMA.

In a technical briefing at AISMA’s annual conference on May 20, AISMA’s specialist VAT officer, Jonathan Main, explained that HMRC does not consider the role of clinical directors to be a service healthcare, which would have exempted him from VAT.

He said: “When PCNs were first established, it was assumed that the work carried out by PCN clinical directors would be exempt from VAT as they would be involved in health services.

“However, HMRC disagrees where the role of the clinical director is to lead and manage the NCP and support practices with planning, direction and governance, rather than being directly concerned with protection, the maintenance or restoration of the patient’s health.”

Therefore, the management work performed by clinical directors on behalf of network practices could be considered a “standard rated service”.

According to HMRC rules, any organization providing services in excess of £85,000 over a 12 month period must register for VAT.

PCNs “don’t work” from a VAT perspective

AISMA board member Andrew Pow added that the way the PCNs were commissioned “doesn’t work” from a VAT perspective, particularly in relation to staff employed to work in all practices.

“Those who have followed advice on restructuring, for example moving staff employed by the NCP into a federation or a company owned by NCP members, may be able to manage any exposure to the VAT using a cost-sharing exemption. However, many NCPs are loose agreements with no formal structure to deal with VAT,” Mr Pow said.

“This could lead to a position where VAT becomes chargeable and would not be recoverable. This would reduce the budget available to the NCP by 20%.

Mr Pow said there was an urgent need for NCPs to review their structure to mitigate the risk of supplying staff employed at other firms in the network.

He said: “It’s not just about buying a standard business and moving on. The business must be properly incorporated, with ownership interests allocated to each of the participating firms in the network, and a cost-sharing arrangement must be in place. These are complex and time-consuming issues for NCPs to deal with, and specialist accounting and legal advice will be required.

AISMA said it marked a “big blow” for clinical directors on a subject it had been seeking clarification on since 2019, when the NCPs were first created.

In 2019, AISMA said VAT was a concern for firms because they have to work together in networks, which creates “outsourcing arrangements”.

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