VAT on supply of care staff

If your business supplies staff—particularly in the care or healthcare sector—getting the VAT treatment right is critical.

While staff supply is usually subject to VAT at 20%, there is an important exception for medical care services.

However, as a recent tribunal case shows, qualifying for this exemption is far from straightforward.

The general rule: Staff supply is taxable

In most cases:

Supplying staff (e.g. through an agency) is a standard-rated supply for VAT purposes.

This means VAT must be charged at 20% on the full value of the service.

The exception: Medical care exemption

A supply can be VAT-exempt if it qualifies as:

The provision of medical care by a suitably qualified professional

This includes individuals registered under specific professional bodies, such as:

• Registered medical practitioners
• Professionals under the Health Professions Order 2001
• Registered nurses, midwives, and nursing associates

In some cases, exemption can also apply where staff are directly supervised by such qualified professionals.

The key issue: Who is providing the care?

A recent tribunal case looked at a company supplying carers to:

• Nursing homes
• Residential care homes

The company treated its services as VAT-exempt, arguing that it was providing care services.

HMRC challenge: No qualified professionals

HMRC disagreed—and the Tribunal supported HMRC’s position.

The key findings were:

• The carers were not registered under any of the required professional bodies
• They were not directly supervised by qualified professionals in a way that met the exemption criteria

As a result:

The services did not qualify as medical care for VAT purposes

Outcome: Significant VAT liability

Because the supplies were incorrectly treated as exempt:

• VAT should have been charged at 20%
• The company faced a substantial VAT bill
• Likely including interest and penalties

This highlights how costly VAT errors can be.

Why this area is so complex

The difficulty lies in distinguishing between:

• General care services (often taxable), and
• Medical care provided by qualified professionals (potentially exempt)

Even if staff are:

• Providing personal care
• Working in healthcare environments
• Supporting vulnerable individuals

This does not automatically qualify for VAT exemption.

Key takeaway: Qualification and supervision matter

To qualify for exemption, the supply must involve:

• Appropriately qualified and registered individuals, or
• Staff working under direct supervision of such professionals

Without this, the supply is likely to be standard-rated.

Practical tips for care and staffing businesses

If you supply staff in the care sector:

• Check whether your staff meet professional registration requirements
• Review supervision arrangements carefully
• Ensure contracts reflect the true nature of the supply
• Avoid assuming exemption applies based on the setting alone

Final thoughts

VAT in the care and staffing sector is highly nuanced.

Even where services feel like “care”, they may still be taxable for VAT purposes.

Getting this wrong can result in large, unexpected liabilities.

Need help reviewing your VAT position?

At Merranti Accounting, we help businesses:

• Determine the correct VAT treatment
• Avoid costly errors and HMRC challenges
• Structure services in a tax-efficient way

If your business supplies staff or operates in the care sector, get in touch with our team for expert advice.

Find more from our newsletter here

Merranti Accounting Ltd- spring 2026 newsletter