VAT on Locums

Update on the VAT treatment of locum doctors (applicable to NHS Trusts, GPs/medical providers, and providers of locums).

Isle of Wight NHS Trust’s appeal was allowed in its First Tier Tribunal VAT case on 16 September 2025, confirming that the supplies of locum doctors who are deputising should be exempt from VAT. HMRC argued that these supplies should be subject to VAT at the standard rate. Typically, and under certain previously decided VAT cases, these supplies would be standard rated and this VAT would be irrecoverable by the recipient. As the case was decided in the First Tier Tribunal, it isn't binding on other taxpayers but is a persuasive decision and both customers and suppliers should be aware of the impact of this on them.
 

Medical Providers (Customers)

The medical provider, who has been charged standard rated (20%) irrecoverable VAT on locums, will now be charged exempt 0% VAT where the supplies of deputising locums qualify for the exemption. This represents a saving for medical providers. Retrospective correction may be available for up to four years, but this requires careful consideration of the legislation, guidance and case law and applying this to relevant supplies.

We recommend that specialist advice is taken to understand how this applies in practice and how to achieve savings.
 

Locum Providers (Suppliers)

The locum provider, who has charged standard rated 20% VAT on locums, may now apply exemption from VAT. However, this poses a risk for the locum provider for a number of reasons. Firstly, the locum provider should consider whether it wishes to rely on a non-binding VAT case as this position could be challenged by HMRC (directly to the supplier or by way of a further appeal in the Isle of Wight NHS Trust case). Secondly, the locum provider should be sure to only exempt qualifying supplies of locums, as not all supplies will become exempt. Thirdly, the provider's level VAT recovery could be reduced as a consequence of making increased exempt supplies thereby increasing its cost base. Again, we recommend that advice is taken to understand the full impact and any mitigating measures, including any partial exemption requirements in the compliance process going forwards.

If this affects your organisation, Lyndon Firth and James Ratcliffe are happy to support you, either in securing VAT savings for you as a customer or in managing the impact on you as a supplier.
 

Contacts

Lyndon Firth
T: +44 (0)113 290 6188
M: +44 (0)7583 002 028
E: lyndon.firth@bdo.co.uk

James Ratcliffe
T: +44 (0)113 204 1212
M: +44 (0)7867 536589
E: james.ratcliffe@bdo.co.uk