Care Homes

Care Home groups that take a proactive approach to VAT reviews can identify recovery opportunities and reduce HMRC risk.

Our fee-on-success approach makes The Proactive Consultancy Group a low-risk method for care groups to access specialist VAT knowledge and advice.

VAT Challenges in the Care Home Sector

One source of VAT complexity within the care sector is exempt and partially exempt activities. Another challenge is VAT for property and capital projects. The mixed activities within a care home presents further VAT complications, as does use of shared services within care home groups. The funding and contract arrangements for residents creates another issue, as do procurement and operational costs. Finally, care home groups have their own set of HMRC compliance risks.

A specialist VAT consultant with knowledge of the care sector can bring clarity that will aid decision-making and improve VAT efficiency.

Get a VAT review tailored to the care sector from The Proactive Consultancy Group.

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Exemption Issues that Affect Care Home Groups

Reclaiming VAT on goods and services is key for the financial health of care home groups. But errors in classification of activities – for example, mistakenly classifying partially exempt activities as exempt – results in VAT leakage. A VAT specialist can assist with partial exemption calculations and annual adjustments, and with allocation of costs between taxable and exempt activities.

A VAT specialist will also have up-to-date knowledge of special calculation methods to use when standard methods give unfair results.

Property and Capital Projects

When a care group constructs new care homes, or redevelops, refurbishes or extends an old one, they may wish to get specialist advice on VAT treatment of professional fees, as well as Capital Goods Scheme considerations. We can also advise care home groups on the VAT implications of acquisitions and disposal of properties.

Mixed Activities Within Care Homes

Some resident services may have an impact on VAT treatments, and there may be complexity in classifying activities like hairdressing, chiropody and similar. Catering arrangements are another area for attention, as are incomes from retail and other ancillary streams, and third-party service providers operating on the site.

Corporate Structures and Shared Services

Care home groups with multiple entities and central management and admin functions can benefit from expert VAT advice, particularly around shared service arrangements and opportunities and risks from VAT grouping.

Funding and Contract Arrangements

Care groups with a mix of self-funded residents alongside those funded by the NHS or by local authorities can benefit from a VAT adviser who is familiar with the tax implications of these different funding arrangements.

Procurement and Operational Costs

Procurement and operational costs such as medical equipment and supplies, agency staffing costs and utilities and facilities management can interact with VAT treatments in various ways, as can central purchasing functions. A review by a VAT specialist can find opportunities for efficiency.

HMRC Compliance Risks

Care homes are subject to historic VAT treatment errors that can lead to HMRC enquiries and assessments with the risk of penalties and interest exposure. Getting early advice from a VAT consultant with experience of the documentation and evidence requirements as they apply to care homes can help mitigate these risks.

Mitigate compliance risks by consulting a VAT adviser.

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Typical Recovery Scenarios in the Care Sector

These are some of the most usual recovery scenarios that we see in our care sector clients:

• Partial exemption recovery reviews including historic underclaimed VAT, incorrect cost allocations and alternative recovery methods that increase VAT recovery
• Property and capital expenditure claims for refurbishment and redevelopment projects and New-build care home schemes
• Overhead and shared service recoveries including head office cost recovery, central management and administration expenditure and marketing, IT and operational support costs
• VAT grouping reviews to identify missed VAT grouping opportunities, intercompany charging issues
• Acquisition and due diligence reviews, to resolve historic VAT liabilities identified during acquisitions; and recovery opportunities uncovered during transactions as well as VAT risks associated with group expansion

Dispute Scenarios in the Care Sector

These are examples of dispute scenarios that may arise within care sector organisations:

• Welfare exemption disputes including application of welfare exemptions
• Supplier and contract VAT disputes including incorrect VAT charged by suppliers; contract interpretation issues; recovery of overpaid VAT and resolving disputes affecting care home operators

Many of our consultants have worked for HMRC in the past and they have the expertise and experience to assist care groups dealing with HMRC challenges about eligibility with supporting evidence and technical analysis. They can also help with HMRC assessments and error corrections, and challenges to VAT assessments, to minimise reduce penalties and interest costs.

Discover more about our VAT disputes and appeals services.

Why Specialist Care Home VAT Advice Matters

Our fee-on-success model makes The Proactive Consultancy Group a low-risk route for care groups to access professional advice about VAT. With our experience working alongside care home groups and multi-site operators, our practical guidance will be supported by an understanding of welfare exemptions and care sector regulations. We also have familiarity with HMRC’s approaches to the care home sector.

Our commercial and practical guidance will support care home groups with growth, acquisitions and development projects while maximising legitimate VAT recovery and reducing compliance risks that could disrupt care operations.