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Are Covid-19 services standard rated or exempt from VAT?

In this article, Akshay Kumar, Finance Director of Covid Testing Network explains how he has been working through the key question of whether Covid-19 testing services are exempt from VAT or not.

Covid Testing Network is a B2B supplier of Covid testing services, offering regular testing services to workplaces, working in partnership with Occupational Health providers and direct to some of the largest employers in the UK.

A key challenge faced by CTN, since its' inception, has been in navigating the sometimes-murky world of VAT particularly as the provision of testing for Coronavirus clearly straddles the provision of healthcare, much of which is exempt for VAT purposes.  We have concluded that as a private commercial supplier of Covid-19 laboratory pathology services, the supply of such services is Standard Rated at 20%; and I will go on to discuss why in this article.

It is clear, from anecdotal discussions with finance counterparts at customers and partner network laboratories, that suppliers of Covid-19 testing services are interpreting their understanding of the rules in different and inconsistent ways. Therefore, I thought it would be useful to share our understanding (coupled with some of the advice we have obtained) of our reading of the VAT requirement.

Disclaimer: It is worth saying at the outset that I am not a tax specialist, and while we at Covid Testing Network, have obtained various assurance from the Department of Health and Social Care (DHSC) and HMRC, each is non-statutory and full of caveats; and therefore, I would strongly advise you to get your own tax and legal advice and not to rely solely on the information I am sharing with you in this article. 

Why we believe our services to be Standard Rated (the legislation):

From HMRC's internal manual on Health - VATHLTH2575:

"Our policy is that the supply of laboratory pathology services that directly relate to the provision of healthcare for individual patients is exempt from VAT. This applies to all businesses that are state-regulated and supply laboratory pathology testing services, whether they supply the services to the NHS or to independent hospitals". 

This raises the question of state regulation and whether Covid Testing Network meets this status. To clarify this, we need to look at the legislation in detail.  Health and welfare exemptions are covered under VAT Act 1994, Schedule 9, Group 4 which states:

"the provision of care or medical or surgical treatment and, in connection with it, the supply of any goods, in any hospital or state-regulated institution." 

Covid Testing Network's B2B tests are used in the workplace by conscious employers (and therefore are not being used in a hospital) and to be exempt, Covid Testing Network would need to be a state regulated institution, which it is not. 

State regulated is further defined under note 8 of the above statute as below:

"state-regulated" means approved, licensed, registered or exempted from registration by any Minister or other authority pursuant to a provision of a public general Act, other than a provision that is capable of being brought into effect at different times in relation to different local authority areas. 

Here "Act" means:

(a) an Act of Parliament;

(b) an Act of the Scottish Parliament;

(c) an Act of the Northern Ireland Assembly;

(d) an Order in Council under Schedule 1 to the Northern Ireland Act 1974;

(e) a Measure of the Northern Ireland Assembly established under section 1 of the Northern Ireland Assembly Act 1973;

(f) an Order in Council under section 1 (3) of the Northern Ireland (Temporary Provisions) Act 1972;

(g) an Act of the Parliament of Northern Ireland.

Health and Social Care in the UK is legislated under the Health and Social Care Act 2008, which confirms the formation of regulatory bodies in the devolved nations of the UK. In England, the regulatory powers under the Health and Social Care Act 2008 are given to Care Quality Commission (CQC) which regulates and inspects health and social care services in England. Therefore, to exempt supplies under health and welfare exemptions under VATA1994, Schedule 9, Group 4, a supplier will need to be registered with the relevant regulatory bodies of the devolved nations (Healthcare Improvement Scotland, Care Inspectorate Wales and in Northern Ireland, the Regulation and Quality Improvement Authority)

Covid Testing Network is not regulated by the CQC and therefore, we are supplying our tests and services with Standard Rated VAT.  We have also seen that HMRC has carved out a further exception to the Health Care Exemption rule for CQC regulated businesses - for example, when they see that a business is providing services to an individual to determine whether they could board an aircraft. An excerpt from VATHLT2575 is as follows:

When are state-regulated pathology laboratories' services not covered by the health exemption?

Exemption does not apply when the services are not:

(b) performed primarily for the protection, maintenance, or restoration of the health of the person concerned but are done solely to provide a third party with information necessary for taking a decision on non-medical matters such as insurance claims, or for legal purposes

In this case HMRC judged that the primary purpose of such tests is to supply information to a third party (the airline, rather than the individual person being tested) to enable them to decide on a non-medical matter, i.e., whether the customer should be allowed to travel. As such they determined that the Exemption was not met, and the supply of services should be as Standard Rated. 

Recent legislative changes also add to the challenge of understanding the VAT position.

The government has passed new legislation from 1 January 2021 which has removed the CQC registration requirement for Coronavirus testing and replaced it with a requirement for UKAS accreditation. As such, we reached out to the DHSC and HMRC to understand what impact this would have on the VAT requirements for a supplier and we have been advised: 

The legislation defines "state-regulated" as "approved, licensed, registered or exempted from registration by any Minister or other authority pursuant to a provision of a public general Act, other than a provision that is capable of being brought into effect at different times in relation to different local authority areas".

The regulations that set out the UKAS requirements are secondary legislation, not an Act of Parliament. As such, HMRC's view is that UKAS accreditation does not fall within the definition of "state-regulated" and these activities are not, therefore, exempt from VAT.

So "not exempt from VAT" means that the supply would be Standard Rated. Further guidance on the new legislation requiring UKAS registration is available in our white paper - available here:

Covid Testing Network would welcome official published guidance from HMRC for providers of Covid-19 tests to ensure that this matter is not subject to confusion, however it is our view that as a commercial supplier of Covid-19 testing, not subject to state regulations, that all our laboratory Coronavirus tests are subject to Standard Rated VAT at 20%

Akshay Kumar is the Finance Director of Covid Testing Network.  Akshay is a qualified ICAEW Chartered Accountant and has 20 years' experience working in professional services as well B2B and B2C e-commerce businesses. The opinions in this article are those of Akshay and are not endorsed by Covid Testing Network. We strongly advise you to seek your own tax advice in this complex area.

For any further discussions and to look through the guidance that Covid Testing Network have received from HMRC/ DHSC to support the above, please contact Akshay directly at [email protected]


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