Is My Practice VAT Exempt? A Discipline-by-Discipline Guide

Your practice is VAT exempt only if you are on a statutory register named in VAT Notice 701/57, and only for treatment with a therapeutic purpose. Everything else you sell, including some things sold by exempt practitioners, is standard-rated at 20%.

That is a narrower rule than most practitioners expect. Being qualified does not do it. Being insured does not do it. Belonging to a respected professional body does not do it either. The question HMRC asks is whether Parliament created a register for your profession, and whether the specific supply you made was aimed at protecting, restoring or maintaining health.

This guide sets out the closed list, then the four traps that catch the people who are on it.

Which allied health professions are VAT exempt?

Exemption comes from VATA 1994 Schedule 9 Group 7, which is the part of the VAT Act that removes certain medical and welfare services from VAT altogether. HMRC's working list of who qualifies sits in VAT Notice 701/57, section 2.1, last updated 23 April 2025.

That list is closed. If your profession is not named, you are standard-rated, however clinical your work looks.

Two rows in that table cause most of the arguments.

The first is the sport rehabilitator. BASRaT is a PSA Accredited Register, which means the Professional Standards Authority has assessed and approved a voluntary register held by a professional body. It is a genuine quality mark, and BASRaT describes it as accreditation rather than statutory regulation. Accreditation is not statutory regulation, the title is not protected by statute, and so the exemption does not reach it. Graduate sport rehabilitators are standard-rated even when the clinical work is indistinguishable from the physiotherapist in the next room.

The second is the split inside the talking therapies. A practitioner psychologist is HCPC registered and exempt. A counsellor or psychotherapist, however senior and however accredited, is not. That distinction is doing a great deal of work in mental health practices, and it is worth reading in full: see counsellors, psychotherapists and VAT exemption.

Does being registered mean everything you do is exempt?

No. This is the trap that catches established practices, usually after a good year.

Exemption attaches to the supply, not to the person. HMRC applies a purpose test, which is a check that the primary purpose of the service was the protection, maintenance or restoration of health. Treatment passes. Wellness, relaxation, performance enhancement and cosmetic work generally do not.

The clearest example is reporting. An HCPC registered physiotherapist writing a medico-legal report, or acting as an expert witness in a personal injury claim, is making a standard-rated supply at 20%. HMRC sets this out in VATHLT2010, following the Court of Justice decision in d'Ambrumenil (C-307/01). The reasoning is that the report exists to help a court decide a case, not to treat the patient. Same clinician, same patient, same clinical knowledge, different VAT treatment.

So an otherwise fully exempt physiotherapy practice with a busy medico-legal sideline can find that the sideline alone is taxable, and can be pushed over the registration threshold by that sideline on its own.

Watch for the same issue in:

• Insurance and occupational health reports commissioned by a third party
• Fitness for work and fitness to travel assessments
• Sports massage and recovery sessions sold as performance or relaxation
• Wellness packages, spa style treatments and general screening "MOTs" sold without a clinical indication
• Room hire to other practitioners, which is a property supply, not a health one

Why is the £90,000 threshold a trap for exempt practices?

VAT registration is compulsory once your taxable turnover passes £90,000 in any rolling 12 months. Taxable turnover means standard-rated, reduced-rated and zero-rated supplies. It does not include exempt supplies at all.

That produces two consequences pulling in opposite directions.

A wholly exempt physiotherapy clinic turning over £400,000 never has to register. That sounds like a win, and for a patient-facing practice it usually is, because your patients are consumers who cannot reclaim VAT and a 20% price rise would be real money to them.

The cost sits on the other side of the ledger. You cannot reclaim input VAT, which is the VAT you pay to your own suppliers, on rent where the landlord has opted to tax, on treatment couches, on shockwave machines, on your practice management subscription, on anything at all. It is a sunk cost baked into your overheads at full price. Practices planning a large fit-out sometimes discover this only after signing the order.

If you have a mix of exempt and taxable income you are partly exempt, which means you can recover input VAT attributable to the taxable side under a partial exemption method, subject to de minimis limits. That is the point where the arithmetic stops being something to do in your head, and an accountant earns their fee.

Are the goods you supply exempt too?

Sometimes. Notice 701/57 section 3.1 draws the line at whether the item is part of the treatment or separable from it.

Anything "administered or applied to your patient in the course of the treatment", which is the notice's language for bandages, drugs, medicines and prostheses, follows the treatment and is exempt. Items separable from the treatment "are not exempt from VAT, and will usually be standard-rated".

The practical test is whether the patient could have walked in and bought the item without the clinical episode. If they could, it is retail, and retail is taxable. A clinic with a busy reception shelf can accumulate taxable turnover for months without noticing.

Can unregistered staff be covered by the exemption?

Yes, through what HMRC calls direct supervision. It is the single most useful provision in the notice for multidisciplinary clinics.

Section 5 of Notice 701/57, read with VATHLT2620, allows services performed by a person who is not on a statutory register to be exempt where they are directly supervised by someone who is. The conditions:

• The supervisor must be a registered health professional from the Group 7 list
• The supervisor does not have to be physically present, so distance supervision is allowed
• There must be no third party sitting between the supervisor and the supervised person
• The supervised work must still pass the purpose test
• HMRC will refuse the exemption where a supervisor has been inserted purely to obtain it

That last condition deserves emphasis. Supervision has to be real: caseload oversight, note review, clinical accountability, the things a professional body would already expect of you. A named physiotherapist on a rota who never sees a note is not supervising anybody, and HMRC treats arrangements built for VAT purposes as exactly that.

For a clinic employing rehabilitation assistants, massage therapists or sport rehabilitators alongside registered clinicians, getting the supervision structure right can move a large slice of income from taxable to exempt. It has to be documented, and it has to be genuine.

What should you do next?

1. Find your profession in the table above. If it is not there, assume standard-rated until an accountant tells you otherwise.
2. Split your income by supply, not by person. Treatment, reports, retail goods, room hire and wellness work all sit in different columns, even when one clinician does all five.
3. Track the taxable column against £90,000 on a rolling 12-month basis, not by tax year. The raw numbers are usually already sitting in your invoicing and reporting, Atlacare included, but the split has to be set up deliberately.
4. If you employ unregistered staff, write the supervision arrangements down before you rely on the exemption for their work.
5. If you offer aesthetic, massage or wellness treatments in England, check whether you also need a local authority licence: see special treatment licences for UK therapists.
6. Re-read Notice 701/57 before you act. It changed in April 2025 and it will change again.

Settle this early. Structuring decisions taken at the start, including whether to trade as a sole trader or a limited company, are far cheaper than corrections made three years in.

This is general information, not tax advice. VAT rules, thresholds and rates change, typically each April, and your position depends on facts this article cannot see. Check the current notice and take advice from an accountant before you register, deregister, or change what you charge patients.

Sources: VAT Notice 701/57, health professionals and pharmaceutical products · HMRC VATHLT2010, purpose of the supply · HMRC VATHLT2620, direct supervision · BASRaT on regulation and PSA accreditation

Related: Counsellors, psychotherapists and VAT exemption · Special treatment licences for UK therapists · Sole trader or limited company? · What it costs to set up a private practice in year one