Cosmetic procedures have become popular nowadays, and everyone seems to have a clinic. If you are an independent practitioner or business in the UK beauty services industry, it is crucial to recognize the tax position for aesthetic services. This leads us to the crucial question—whether VAT is relevant and, if so, what the rate is.
In any case, almost all cosmetic procedures are subject to the standard VAT rate of 20%. Most treatments performed with artistic intent by a doctor for a medical reason are VAT-exempt, or VAT medical is zero. If you offer both, computing VAT correctly for aesthetic services is essential.
This blog post will cover the appropriate VAT rate for purely aesthetic treatment vs. a medical procedure, VAT exclusion, and key points related to compliance with the UK HM Revenue and Customs (HMRC).
What is VAT?
Value-added tax (VAT) is charged on most products and services traded within the UK. The VAT is computed based on the amount of value added to the product or service at different points of manufacturing and delivery.
This implies that businesses must charge their clients the same to recover the VAT paid by them on the acquired materials and services.
In the UK, the standard VAT rate is currently 20%, although there are lower rates for specific products, including food and children’s clothing. Additionally, some goods and services, like medical treatments and supplies, are completely outside VAT’s realm.
Is VAT Registration Required for My Aesthetics Business?
Any person operating aesthetic services must register for VAT if the turnover goes beyond £85,000 in a period of 12 months. However, from there on, there are products and services for which you can charge VAT, and you recover the VAT on the things you buy.
You are free to register for VAT even though you have not attained the threshold because it is to the advantage of the business. One benefit of doing so is that VAT-registered companies can be perceived as more serious by customers, suppliers, and prospective business partners.
Therefore, it is advisable to seek guidance from professional accountants who will assist you in applying for VAT medical registration and brief you on your new tax regime.
What is the VAT rate for cosmetic services?
To avoid HMRC fines, cosmetic service providers must understand the tax consequences of each service.
The typical VAT rate is 20%, which applies to most cosmetic services; however, specific procedures, particularly those performed by medical specialists, are VAT-exempt.
Flat-rate VAT for cosmetic procedures
VAT is applicable if you provide various non-surgical face and body treatments, such as soft tissue fillers, skincare, laser hair removal, or Botox.
It is levied at the regular rate of 20%. Thus, you must appropriately calculate and pass the VAT to your consumer. It is critical to market your services at the VAT-inclusive price.
TaxCan and Cangaf Accountants, the leading accountants for cosmetic services in the UK, will help you determine the appropriate VAT rate and compute it accurately.
VAT-exempted medical care
VAT medical or the VAT charged on private medical and clinical health services in the UK are tax-free. However, some cosmetic procedures may be VAT-exempt, provided they have a therapeutic purpose and are performed by a medically certified person.
As a result, some operations or treatments performed by a medical expert to treat a medical condition are free from VAT, such as clinical dentistry, therapies to alleviate the symptoms of skin disorders, mole excision, or reconstructive surgery following an accident or sickness.
However, the VAT domain on aesthetic services is complex. HMRC provides guidelines to determine the kind of therapies that are eligible for VAT exemption. Cosmetic firms should seek knowledgeable tax counsel to avoid fines and costly blunders.
Combined Medical and Aesthetics
It is, of course, much more complex if your business provides medical and aesthetic services simultaneously.
For instance, if you operate a dental practice, your standard medical services (see the definition above), such as root canals, crowns, and fillings, are typically VAT-free. However, activities such as bleaching, considered aesthetic-related, will attract a flat rate of 20% VAT.
However, if veneers have been proven medically necessary for cosmetic treatment, they might attract zero VAT.
If a clinic offers both services, the practice would need to apply the correct VAT rate to each treatment.
We are your specialist aesthetics accountant if you require advice on complying more with the regulations.
What causes some beauty treatments not to be subjected to VAT?
While generally executed for cosmetic purposes, some treatments entail a few health advantages; therefore, they might be regarded as VAT-exempt services.
For instance, Botox has been used to cure migraines, excessive sweating, and hyperhidrosis. As a result, Botox is eligible to be classified as VAT-exempt if administered in the context of a health care plan.
There is a question of whether medical consultations are VAT-exempt or not.
Private medical consultations in the UK normally attract no tax or VAT, and medical costs are zero. This exclusion is meant to professionally cover consultation fees that doctors, dentists, and nurses provide for health-related consultations.
This encompasses issues related to treating illness, injury, or disease prevention. The exemption also includes the advice given during the consultation, like telling a patient to take a particular medicine or to follow a certain treatment.
Nevertheless, one must remember that certain services offered during the consultation may be standard-accompanied by the VAT, for example, the supply of medical products, including prosthetics. It’s recommended that the medical professions and their practices contact the best accountant with budget rates if you’re unclear about your VAT status.
Conclusion
In general, purely aesthetic services are subject to the regular rate VAT of 20%. Aesthetic treatments performed by a medical expert for medical reasons are normally VAT-exempt. If you provide both, it is critical to compute VAT proportionally. You should speak with a tax consultant like TaxCan and Cangaf Ltd. if you are unclear about your tax situation.
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