Botox treatments may be subject to VAT

Botox treatments may be subject to VAT

Botox treatments should be taxed as a vanity treatment and not permitted to be tax-free as a medical therapy a court ruled last week. In a precedent-setting first-tier tax tribunal judgment, a judge ruled in favour of HMRC in its case against a southwest London skincare clinic, Skin Rich, that had provided injections without paying VAT. But this probably won’t apply to dentists offering such treatments.

But Alan Suggett​, Dental Business Unit Partner at accounts UNW told GDP UK:

“Dentists who carry out “cosmetic” treatments (as defined for VAT purposes) more than the annual VAT limit (approx £85k) are obliged to charge VAT. However, most dentists categorise potentially cosmetic treatments as being for the benefit of the customer/patient’s health, and therefore not subject to VAT.”

UNW VAT partner Mark Hetherington added: “There has been no change to VAT rules with cosmetic work always regarded as falling short of the VAT exemption for medical care.  In order for it to be VAT exempt the primary purpose for the treatment has to be aimed at prevention or cure, and in this case the Tribunal decided that the primary purposes was cosmetic (therefore 20% VAT).”

The clinic Skin Rich had argued that its treatments helped patients’ medical or psychological conditions by boosting their self-esteem, and so meant they qualified as VAT-exempt. The court found, however, that they were primarily for cosmetic purposes and so should have been subject to a 20 per cent VAT charge. Skin Rich now faces having to pay a backdated tax bill of £21,064.

Experts say the judgment means that all practitioners in the Botox sector, which in Britain is worth about £2.5 billion, will have to add VAT to treatments as standard or expect to be investigated by the taxman.

Gary Brothers, of Independent Tax, which represented Skin Rich, said that the added costs were likely to be passed on to customers. He said that the judge had concluded “in effect that Botox was primarily being used by vain, silly women sorting out their wrinkles — which is a finding we disagree with”.

Scott Harwood, a director at the accountancy firm RSM, said that clinics would still potentially be able to claim VAT relief if they provided case-by-case evidence that a client’s mental health would be harmed if they failed to have treatment, but that they must be ready to provide documentary proof of diagnosis. “The burden of proof will now clearly shift. If you are a little bit depressed about your big nose or wrinkles, it’s clear HMRC still views cosmetic surgery as being a vanity project,” he said.

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