If you’re a medical or health professional, such as a nurse, who is staffed by a recruitment agency, you should be aware of the nursing agencies’ VAT concession.
In most cases, when a recruitment agency supplies staff in the healthcare sector, this supply is VAT taxable on the recruitment agency. Therefore when your agency sends your umbrella company funds, this should include payment for VAT (20%).
This piece of legislation can be quite confusing as there are a few cases where your agency will not be required to pay you VAT.
Does the nursing agencies’ VAT concession apply to me?
The VAT concession would apply if you are a nurse or nursing auxiliary who falls under these categories:
- You are in the register of qualified nurses and midwives under article 5 of the Nursing and Midwifery Order 2001 and you provide medical care to a patient
- You are an unregistered nursing auxiliary being supervised directly by a professional who is on the register of qualified nurses and midwives; or
- You are an unregistered nursing auxiliary who provides services to either an NHS or private hospital, a hospice or a care home with nursing.
(Section 6.5 of Notice 701/57 Health professionals, pharmaceutical products and VAT)
If any of the above apply to you, you should not expect to see VAT payments from your agency.
The issues with the VAT concession
Since April 2017 and the introduction of off-payroll in the public sector, there’s been a drastic increase in the use of umbrella companies. The nursing agencies’ VAT concession causes quite a bit of confusion for recruiters, largely based on who should pay VAT – the end-client, the umbrella company or the agency.
If you’re a healthcare worker, your agency is required to pay VAT for your services because it is the organisation supplying healthcare staff. The cost cannot be passed to the end-client or umbrella company.
Working through an umbrella company in the health sector
If you work through an umbrella company, it will take care of employee administration for you. This includes forwarding timesheets to your agency with VAT added if you are not exempt. Compliant umbrella companies with the proper processes in place will do this.
The umbrella company will pay the VAT to HMRC on your behalf once it’s received funds from your agency. It will also handle your income tax and National Insurance (NI) payments.
You can find an umbrella company service through your agency or by doing your own research. The umbrella will provide you with a calculation to tell you how much you’ll take home after tax and NI.