VAT and Care Services: What's Exempt and What Isn't

When you are working out the cost of care, there is a question that is easy to overlook but can matter a great deal: does VAT apply? At a standard rate of 20 percent, VAT can add a significant amount to any bill, so it is well worth understanding where it does and does not apply to care.

The reassuring headline for most families arranging care from a regulated provider is this: care services are generally exempt from VAT. Here is what that means, and where VAT can still crop up. As with anything to do with tax, this is general information rather than advice, and we will point you to the right people for your own situation.

First, the basics

VAT, or Value Added Tax, is a tax of 20 percent added to the price of many goods and services in the UK. On something as significant and ongoing as care, an extra 20 percent would make a real difference to the cost. So whether care is exempt from VAT is genuinely worth knowing.

Care from a regulated provider is VAT-exempt

Here is the key point. Under UK law, welfare services, which include the personal care that live-in and home care provide, are exempt from VAT when they are supplied by a "state-regulated" provider. In England, state-regulated means registered with the Care Quality Commission (CQC).

In plain terms: a CQC-registered care provider does not add VAT to its care fees. The fee you are quoted is the fee, with no 20 percent added on top.

Helpfully, this exemption does not depend on who is paying. Whether your loved one's care is funded privately, by the local council, or by the NHS, the care itself is treated the same way for VAT purposes. So the exemption applies to families paying for their own care just as much as to council-funded care.

This is a genuine, if often overlooked, advantage of choosing a fully regulated care provider. Edyn is CQC-registered, so the care we provide falls under this welfare exemption. You can read more about our regulated status in our guide to whether Edyn is CQC registered.

Where VAT can still apply

It is worth being clear about the situations where VAT can come into the picture, because they do exist.

Unregulated providers. The exemption depends on the provider being state-regulated (or a charity or public body). A provider that is neither CQC-registered nor a charity may have to charge VAT on its services. This has been confirmed in the courts. So paradoxically, care from an unregulated provider could carry VAT that regulated care does not.

Introductory and matching agencies. This is an important one. A pure introductory agency, the kind that simply introduces you to a self-employed carer and then steps back, is generally providing an "introduction service" rather than care itself. An introduction service is standard-rated, which means VAT can be charged on the agency's fees. So the way an arrangement is structured can affect whether VAT applies.

Some other services. Certain things beyond the core care, or arrangements that amount to supplying staff rather than providing care, can be treated differently for VAT. These are more technical matters that a provider or accountant can explain.

Another point in favour of regulated care

VAT exemption is not the main reason to choose a regulated care provider, but it is one more concrete advantage to add to the list. Alongside the oversight, accountability and national standards that come with CQC registration, there is the simple fact that the care fees do not carry VAT.

With an unregulated arrangement, or a pure introductory agency, VAT can add to what you pay. It is one of several practical reasons the fully managed, regulated model can work out more straightforward than it first appears. Our guides to CQC-regulated care versus introductory agencies and the cost of live-in care explain more.

A quick word on what "exempt" means

You may see the terms "exempt" and "zero-rated" used, and they are not quite the same. For your purposes as a family, what matters is simply this: where care is exempt, no VAT is charged to you on the care fees. That is the part that affects your bill.

Always check for your own situation

VAT in the care sector is genuinely complex, with various nuances and exceptions, and the rules can change over time. This guide is general information only, not tax advice, and Edyn is not a tax adviser.

For your own circumstances, the best course is to check directly: ask any care provider clearly whether their fees include or exclude VAT, and for anything more detailed, speak to a qualified accountant or consult HMRC's guidance on VAT for welfare services. A regulated provider will always be happy to confirm the VAT position on their fees.

In short

Care provided by a CQC-registered provider is generally exempt from VAT, so there is no VAT added to your care fees, whoever is paying. VAT is more likely to come into play with unregulated providers or with the introduction fees charged by pure matching agencies. For most families arranging regulated care, it is one less thing to worry about.

If you would like to talk through the cost of care, and exactly what is and is not included in our fees, we would be very glad to help.

Book a free care advice call, or give us a ring on 020 3970 9900.

This guide offers general information only and is not tax or financial advice. Edyn is not a tax adviser. VAT rules are complex and subject to change, so please confirm the position for your own circumstances with the care provider, a qualified accountant, or HMRC.