VAT & Supplies of Agency Staff

In the recent Tribunal case of Truth Recruitment Limited, the VAT status of agencies supplying carers to care homes was put under the spotlight. The decision offers important guidance for care sector businesses and agencies alike.

Truth Recruitment, a VAT-registered company, supplies carers to nursing and residential care homes. HMRC challenged the company’s VAT return, denying most of its input tax claim and assessing VAT due of just over £2,000. The company did not dispute the figures, but argued that its supplies should be exempt from VAT.

The crux of the case was whether Truth Recruitment’s supplies fell within the VAT exemptions for medical and welfare services under Group 7, Part 2, Schedule 9 of the VAT act. These exemptions cover services provided by registered medical professionals, care in hospitals or state-regulated institutions, and welfare services supplied by charities or public bodies.

The Tribunal found that none of the carers supplied by Truth Recruitment were registered or enrolled in the professional registers required for exemption. Nor were the services wholly performed or directly supervised by such professionals. As a result, the supplies did not qualify for exemption under the relevant VAT rules.

Truth Recruitment argued that its supplies should be exempt because the care homes themselves make exempt supplies, and that other agencies did not charge VAT. The Tribunal rejected these arguments, clarifying that the VAT status of the recipient (the care home) does not determine the VAT treatment of the supplier’s services. Each supply must be assessed on its own merits.

The company also raised issues about commercial disputes and alleged unfairness in HMRC’s conduct. The Tribunal found these points irrelevant to the VAT liability and confirmed that HMRC’s assessment was validly issued.

In summary, the decision underscores that agencies supplying carers must ensure their services are provided by, or under the direct supervision of, registered professionals to qualify for exemption.

Supplying staff - even to exempt care homes - does not automatically make the supply itself exempt.

For care agencies, this case is a timely reminder to review their VAT position and ensure compliance with the statutory requirements for exemption.