There is some welcome good news for high street pharmacists. Whilst the sector has suffered badly recently, the Government has announced a re-direction of NHS funds to support an extension of the services they can routinely offer. Pharmacists have always had arrangements whereby the NHS refunds the drugs which they dispense on behalf of the NHS (although the levels of reimbursement have been declining). NHS funding is now being extended to include services, such as blood pressure monitoring and checking for diabetes.
VAT exemption already existed for care provided by registered medical professionals (such as pharmacists). However, until the changes in VAT legislation in May 2023, the exemption for services provided by pharmacists would be restricted to services which the qualified pharmacist themselves personally performed. The changes in VAT law extend the exemption to services performed by other personnel directly supervised by the qualified pharmacist. Furthermore, there is now a mechanism for the pharmacy business to be paid for performing these services by the NHS. This incentivises what could be a very significant uptake for pharmacists, thereby relieving the pressure for those other areas of the NHS previously providing such services.
However, there are some down-sides to the expansion in funding and the extension of the VAT exemption which arise from the operation of VAT partial exemption. For those pharmacies taking up the new funding (and it is hoped that there will be many), there will be the requirement to comply with partial exemption. Further to this additional compliance burden, this will often be accompanied by additional VAT costs; not only would general overheads be adversely impacted, but additionally any capital purchases specifically acquired to perform the services (eg blood pressure and diabetes testing equipment) could have the VAT recovery of the purchase completely restricted.
For material land-based costs (eg property acquisition, enlargement or refurbishment) incurred in the previous 10 years there could also be ‘claw-backs’ of previously recovered VAT under the operation of the VAT capital goods scheme. As such clawbacks could exceed the additional revenues accruing for the new services, pharmacists should take care to assess their own individual positions.
As ever, specialist advice taken at an early stage is to be recommended.
Speak your usual Just VAT contact or request a call-back for more information.