Medical vs cosmetic: How to navigate VAT as a facial aesthetician

Feb 2, 2024

If you’re a facial aesthetician, hiring an accountant for your business could be one of the best decisions you make in 2024. After all, knowing how much VAT to catch on different services isn’t always straightforward – especially if you provide medical services alongside cosmetic procedures.

Here’s what you need to know, and how an expert can help you with your VAT responsibilities.

The VAT basics

First things first, let’s talk about what VAT means for your business. VAT is a tax that many businesses must charge when selling certain goods and services to consumers. VAT-registered businesses then report and pay the VAT they’ve collected to HMRC.

Not all businesses need to do this. In fact, it’s only compulsory if you have a turnover of over £85,000 a year. Exceed this threshold within any 12-month period, and you’ll need to register for VAT on the Government website.

Once you’re a VAT-registered aesthetics practitioner, you must charge VAT accurately. And thanks to Making Tax Digital (MTD) for VAT rules, you’ll also need to keep digital records and report VAT using HMRC-approved software.

While that might sound like a pain in the neck, there are benefits to registering for VAT. In fact, some people sign up voluntarily! If you’re VAT-registered, you can often reclaim the VAT you pay when buying items for use in your business.

VAT is a notoriously complicated part of the UK tax system, and getting it right can be incredibly time-consuming. What’s more, VAT planning is also not just about being compliant – it’s about being tax-efficient.

Hiring a VAT accountant to help with your facial aesthetics business can help you stay on top of your reporting obligations and give you more control over your finances.

VAT on medical and cosmetic treatments

Earlier on, we told you that certain goods and services face a different VAT charge. The base rate is 20%, but some items are subject to a reduced rate of 5%, are zero-rated, or even exempt altogether.

This can make managing your VAT obligations challenging, to say the least. But how does that affect your facial aesthetics business?

The main thing you need to know is that medical and cosmetic treatments are often treated differently:

  • Medical treatments provided by registered health professionals are VAT-exempt
  • Cosmetic treatments are taxed at the standard rate of VAT (20%).

In other words, if your treatment is specifically for a medical purpose, such as botulinum toxin injections for migraines, then these treatments are VAT-exempt. In this instance, you do not need to charge VAT or complete a VAT return.

You’ll have to be able to prove that your treatments fall under this category. There is a list of VAT-exempt health-related items on the Government website, but the rules aren’t always straightforward. An accountant can help ensure that you apply them correctly.

Meanwhile, cosmetic treatments that are not deemed to fulfil a specific medical purpose, such as soft tissue fillers for lip augmentation, should be charged at 20%, even if they benefit a patient’s well-being.

On the plus side, you may be able to reclaim some of the VAT you’re charged when purchasing non-medical equipment. Again, this is where professional input can be indispensable.

Partial exemption

If you offer a mix of taxable and VAT-exempt services, you’ll fall into the partial exemption rules, which can make recordkeeping more complicated and restrict the amount of VAT you can recover.

These rules are complex and will affect some businesses differently than others. As a result, you should speak to an accountant before attempting to navigate this complex area alone.

Getting the VAT support you need

Accessing our VAT services could be hugely beneficial to your facial aesthetics business, especially if you offer both cosmetic and medical services.

With a professional managing your VAT obligations for you, you won’t need to worry about the extra administrative burden. This can free up time for you to focus on what you do best: making your clients feel like their best selves.

Furthermore, as accountants for facial aestheticians, we know that you may face unique VAT challenges in your profession. You can rely on us to keep you on the straight and narrow, so you won’t need to worry about inaccuracies on your VAT return or non-compliance fines. How’s that for peace of mind?

Get in touch with us to find out how our VAT services can help your facial aesthetics business.

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