Supplying or engaging locum doctors? HMRC’s VAT change could affect you

Published by Tim Creasey on 29 July 2026

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HMRC has updated its position on the VAT treatment of locum doctors following the First-tier Tribunal decision in Isle of Wight NHS Foundation Trust v HMRC, published in Revenue and Customs Brief 6 (2026).

HMRC now accepts that supplies of GMC-registered locum doctors may qualify for VAT exemption, including where those doctors are supplied through an agency or employment business. 

This could have significant implications for NHS bodies, private healthcare providers, locum agencies, and locum doctors.

Which roles qualify for the exemption?

The change applies to GMC-registered locum doctors who perform medical services in that professional capacity.

HMRC has confirmed that, in its view, the exemption does not extend to other health professionals (such as allied health professionals) even when registered with the GMC.

Recovering historic VAT: What you need to know

Businesses that have previously charged VAT on qualifying locum doctor supplies may have an opportunity to recover overdeclared VAT. However, any claim will require careful review, as HMRC is expected to consider factors such as unjust enrichment, the impact on input VAT recovery and the overall VAT position of the parties involved.

In many cases, claims are likely to need to be submitted by the employment business that originally charged the VAT.

Don’t overlook the wider VAT impact

HMRC’s change in approach is one of the biggest VAT developments the healthcare sector has seen in years.

While there could be valuable VAT recovery opportunities, businesses should take care before submitting a claim. Factors such as VAT repayments, unjust enrichment rules and input VAT recovery can all affect the amount recoverable.

Organisations that supply or engage locum doctors should review their arrangements now. The change may also reduce, or even remove, the VAT advantage that has traditionally made direct engagement models attractive in the healthcare sector.

If you’d like to understand how these changes could affect your organisation, please contact our VAT team.

RevealDoes this mean all locum doctor supplies are now VAT exempt?

No. HMRC’s revised position applies to supplies of GMC-registered locum doctors providing medical services in their professional capacity. Each arrangement should be reviewed to confirm whether the exemption applies.

RevealWho can make a VAT recovery claim?

In most cases, any claim for overdeclared VAT is likely to need to be made by the employment business or agency that originally charged and accounted for the VAT to HMRC. 

RevealCan healthcare providers recover VAT directly from HMRC?

Generally, healthcare providers would not submit the claim themselves; however, they may wish to discuss the impact of any claims with their suppliers.

RevealHow far back can claims be made?

This will depend on the specific circumstances of each case. Businesses should review their position to understand the potential scope of any historic VAT recovery opportunity.

RevealDoes this affect other healthcare professionals?

Based on HMRC’s current view, the revised treatment does not extend to other healthcare professionals, such as allied health professionals, physician associates, or anaesthesia associates even when registered with the GMC.  

RevealWill this affect future invoices?

Potentially. Businesses should review their contracts, invoicing processes, and VAT treatment to determine whether changes are required for future supplies. 

RevealWhat should businesses do now?

Organisations that supply or engage locum doctors should review their arrangements, assess any VAT recovery opportunities, and consider the impact on future VAT treatment as soon as possible.

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