Expert insights for healthcare practices navigating VAT policy changes and compliance
In 2026, the landscape of UK Value Added Tax (VAT) for locum doctors and GP practices continues to shift — making it essential for GP practices to stay informed, compliant, and financially efficient. With recent tribunal rulings and HMRC guidance affecting how VAT applies to locum doctor supplies, proactive financial planning and specialist support have never been more important.
1. Understanding VAT for Locum Doctors in 2026
What Changed: HMRC’s Updated VAT Position
Historically, HMRC treated supplies of locum doctors — especially via agencies — as standard-rated taxable supplies because they were viewed as supplying staff to a GP practice or healthcare provider.
However, a landmark First-Tier Tribunal decision in Isle of Wight NHS Trust v HMRC has reshaped this in late 2025. The tribunal ruled that supplies of locum doctors qualify as VAT-exempt under Item 5, Group 7, Schedule 9 of the VAT Act 1994, extending the provision beyond traditional “deputising” services to include locum doctors filling normal clinical roles — including those provided via agencies.
HMRC has chosen not to appeal this decision and is in the process of revising its guidance.
What this means for GP practices:
- Locum doctor supplies may now be treated as VAT-exempt.
- Practices that were previously charged standard VAT on locum services might now be eligible for repayment claims (subject to the four-year time limit for HMRC claims).
2. How VAT Exemption Works for Locum Doctor Services
VAT exemption for medical services hinges on HMRC’s health-and-welfare exemption rules, which generally apply to services that involve the actual provision of medical care.
Criteria for Exemption
To qualify as VAT-exempt:
- The services must fall within Group 7 (health and welfare) of Schedule 9 to the VAT Act 1994.
- The services must constitute genuine medical care delivered by a registered medical practitioner.
Under the old interpretation, VAT exemption was limited to out-of-hours deputising and similar services — excluding standard locum services. But the recent ruling has broadened the scope, recognising that registered doctors covering clinical shifts are supplying medical care, not merely staffing.
Key implication: Practices receiving locum doctor services may no longer incur standard-rate VAT at 20% for services that meet exemption criteria — which can improve cashflow and reduce costs.
3. VAT Registration Thresholds and Exemption Complexities
Even with exemptions, VAT rules for GP practices and locum doctors involve key administrative requirements — especially around registration thresholds.
VAT Registration Threshold
For 2026, the UK VAT registration threshold remains a rolling £90,000 of taxable turnover within a 12-month period.
However:
- Exempt supplies — like most medical services — do count toward the threshold, meaning a GP practice or locum doctor could still trigger registration even if the income is exempt.
- Once registered, VAT obligations arise for any taxable elements of services provided.
Important: VAT registration doesn’t automatically mean charging VAT on exempt supplies — but it does mean more compliance work (MTD VAT returns, digital records, etc.).
4. VAT Treatment Scenarios for Locum Doctors
Understanding how VAT applies requires looking at specific situations:
Scenario 1: Locum Services Provided Directly to GP Practices
- If a locum doctor — whether self-employed or contracting through a limited company — is providing medical services directly and those services meet the exemption criteria, VAT may not be due.
Scenario 2: Services Provided Through Agencies
- Previously taxable because of staff supply rules, this now likely qualifies for the same exemption following the tribunal ruling — but remaining HMRC guidance will clarify details for 2026 and beyond.
Scenario 3: Mixed or Non-Medical Services
- Any service that does not qualify as medical care (e.g., non-clinical consultancy, management training) may still remain standard-rated for VAT.
5. How GP Practices Can Identify VAT-Exempt Supplies
Before 2026, many GP practices may have been charged VAT on locum doctor invoices without realising the potential for exemption. Now, it’s crucial to perform proper due diligence:
Steps for GP Practices
- Review contracts with locum doctors and agencies.
- Analyse the nature of services — are they genuine medical care or simply staffing?
- Check whether the services supplied fall under Group 7 Schedule 9 of the VAT Act 1994.
- Seek specialist advice to determine whether VAT should have been charged historically.
If you need support navigating these reviews and potential HMRC claims, specialists like Kudos Accounting’s VAT specialist services can help. (See: VAT Specialist services page).
6. Claiming VAT Refunds for Overpaid VAT
GP practices and locum suppliers who have been charged VAT on services that now qualify as exempt may be eligible to claim refunds of overdeclared VAT, subject to the standard four-year claim limit.
Important Points:
- Claims must be submitted by the person or organisation that actually paid the output tax.
- HMRC will not grant refunds that would result in unjust enrichment.
This is a major opportunity for practices to recover VAT — especially if VAT has been charged routinely without considering the exemption criteria.
7. Practical VAT Compliance Tips for GP Practices
Beyond exemption and refunds, GP practices must stay vigilant with VAT compliance — particularly with the 2026 shift toward digital processes:
Mandatory E-Invoicing and Making Tax Digital (MTD)
From 2026, VAT-registered businesses — including practices that handle VAT on any services — must adopt e-invoicing and submit digital invoices that connect directly with HMRC’s systems.
What that means:
- VAT invoices must contain all required structured data.
- Digital transmission directly to HMRC may replace traditional quarterly VAT return submission.
- Practices should upgrade to MTD-compliant accounting software and systems to avoid compliance issues.
8. Benefits of Specialist VAT Support for GP Practices
Navigating VAT — especially with evolving guidance and digital reporting requirements — can be overwhelming for busy GP practices. That’s where expert support makes a tangible difference.
At Kudos Accounting, our team offers specialist services tailored to healthcare VAT, including:
- VAT exemption analysis and compliance checks.
- VAT registration assistance and guidance.
- VAT refunds and historical claim support.
- Ongoing reporting and MTD integration support.
Whether you’re reviewing locum VAT positions, preparing for digital invoicing, or ensuring compliance in 2026 and beyond, a specialist healthcare accounting partner can save time, reduce risk, and improve financial outcomes.
FAQs — VAT and Locum Doctors for GP Practices
1. Are locum doctor services always VAT-exempt in the UK?
Not always. Services that genuinely qualify as medical care under Group 7, Schedule 9 of the VAT Act are typically VAT-exempt. However, non-clinical or mixed services may still be taxable. Recent tribunal rulings have expanded the exemption to many locum doctor services, but each case must be reviewed carefully.
2. Can GP practices claim refunds for VAT previously paid on locum services?
Yes. If VAT was charged on locum services that should have been treated as exempt, GP practices may be able to claim refunds for VAT paid in the past four years, subject to standard HMRC conditions and evidence requirements.
3. Does the VAT registration threshold still apply to GP practices and locum doctors?
Yes. Even though many medical services are VAT-exempt, exempt supplies still count towards the £90,000 VAT registration threshold. If this threshold is exceeded, VAT registration and ongoing compliance obligations may still apply.
4. What happens after the 2026 e-invoicing rollout?
From 2026, VAT-registered entities must issue structured digital invoices using HMRC-compliant software. These invoices will transmit data directly to HMRC, replacing traditional manual VAT reporting processes.
5. Should my practice work with a VAT specialist?
Absolutely. VAT specialists with healthcare expertise can help GP practices maximise compliance, identify potential VAT refunds, manage exemptions correctly, and streamline digital VAT reporting under the latest HMRC rules.