VAT Ruling: Medical or Cosmetic
The Upper Tribunal’s (UT) decision in Illuminate Skin Clinics provides important guidance on the VAT exemption for medical care, particularly in the context of cosmetic and aesthetic treatments.
Illuminate operated a private clinic offering a range of treatments, including Botox and dermal fillers. The central issue was whether these services, when provided by a registered medical practitioner, qualified for VAT exemption as “medical care”.
The FTT had previously ruled that most of the clinic’s services were not exempt, finding that they were primarily cosmetic rather than medical in nature. The FTT focused on whether the services involved the diagnosis, treatment, or cure of diseases or health disorders, concluding that the majority were not “medical care” for VAT purposes.
On appeal, the UT clarified the correct legal approach. The key test is to determine the “principal purpose” of the supply. If the principal purpose is therapeutic – such as diagnosing, treating, or preventing disease or health disorder – the exemption may apply. If the principal purpose is cosmetic, the exemption does not apply, even if there is some incidental therapeutic benefit.
The Tribunal rejected the argument that any therapeutic purpose, however minor, would suffice for exemption. Instead, a multi-factorial analysis is required, considering factors such as the diagnosis, the nature of the procedure, the symptoms, the context, and the understandings of both the client and practitioner. The Tribunal also noted that a formal, detailed diagnosis is not always necessary, especially for straightforward conditions, and that the FTT had set the evidential bar too high.
They further clarified that cosmetic procedures can be exempt if their principal purpose is to treat a disease or health disorder, but not if performed solely or primarily for aesthetic reasons. The assessment must be based on objective evidence, but “diagnosis need not be elaborately recorded”.
The UT found that the FTT had applied the test for therapeutic purpose too narrowly and had set too high a standard for evidence of diagnosis. The case was remitted to the FTT for reconsideration, with guidance to apply the principal purpose test in a multi-factorial way.
In summary, the decision confirms that VAT exemption for medical care depends on the principal purpose of the supply, assessed through a holistic, fact-specific analysis.
This case provides significant guidance for clinics and practitioners offering treatments that may have both cosmetic and therapeutic elements. We strongly recommend that clinics consider they’re position. Please contact one of the VITA team if you would like advice or assistance.
