HMRC has published a brief on changes to the VAT treatment of ultrasound scanning services for pregnant women following the decision of a First Tier Tribunal (FTT)
The tribunal’s judgment related to a case brought by the company Window to the Womb, which operates a franchise model for businesses which supply various packages of ultrasound scans for pregnant women in high street settings rather than medical centres.
Supplies of certain health services provided outside hospitals and other institutions are exempt from VAT under Item 1 of Group 7 of Schedule 9 to the Value Added Tax Act 1994.
This exemption is subject to two conditions. Firstly, the services must be provided by an appropriately qualified health professional, and secondly the services must be medical care which means that they must meet the primary purpose test.
HMRC had sought to argue that the services provided by the Window to the Womb franchisees should be standard-rated for VAT, as the business model did not suggest that the primary purpose of the supplies is the protection of health.
However, the FTT concluded that a large majority of customer’s purchased scans with the primary purpose of obtaining a well-being report or information about the growth and presentation of the foetus.
While the remaining customers purchased both the well-being report and 4D imagery (which was intended to promote ‘baby bonding’), the FTT concluded that the customers primary purpose in purchasing the scans was also to monitor the pregnancy and, if necessary, receive a diagnosis of any abnormality.
HMRC has accepted the FTT’s decision in the case and in response has issued a brief which clarifies how other businesses providing similar supplies will be treated.
It also invites anyone who considers that they have received an incorrect ruling prior to that decision to seek a corrected ruling and a refund of any tax incorrectly overpaid.
Requests will be considered provided they are properly evidenced. After an initial review HMRC reserves the right to ask for more information to ensure that the two conditions are fully satisfied.
Those claiming for a VAT exemption or for a refund of VAT paid will need to demonstrate that that the services were performed by appropriately qualified professionals, or where services are provided by others, evidence that they were under the direct supervision of professionals, and that the primary purpose test was met.