In Illuminate Skin Clinics Ltd v HMRC [2025] UKUT 341, the Upper Tribunal (UT) found that the First Tier Tribunal (FTT) had made an error of law when considering the medical exemption for VAT. The FTT had failed to give sufficient consideration to the documents which evidenced a diagnosis by the clinic's doctor of any health disorders.
Illuminate Skin Clinics Ltd (Illuminate) operated a private clinic offering a range of treatments, including fat freezing, thread lifts, chemical peels, fillers, facials, intravenous drips and boosters.
- Illuminate Registered for VAT in August 2014 and Deregistered in May 2017.
- Following a visit in February 2019, HMRC issued a decision that supplies made by Illuminate during the VAT period 12/16 were not exempt from VAT.
- Illuminate’s claim for a VAT repayment was rejected and HMRC raised a Best judgment assessment for underpaid output VAT.
- Following a Statutory review, which upheld HMRC’s position, Illuminate Appealed to the First Tier Tribunal (FTT).
Item 1, Group 7, of Schedule 9 of VATA 1994 exempts the supply of services consisting of the Provision of medical care by a person on the register of medical practitioners.
It was agreed that Illuminate's sole director and shareholder was on the register of medical practitioners. This meant that the only point in dispute was whether Illuminate’s supplies constituted ‘medical care’.
Referring to the Court of Appeal decision in Mainpay v HMRC [2022] EWCA Civ 1620, the FTT found that:
- Medical care means diagnosing, treating and, insofar as possible, curing diseases or health disorders.
- The services must have a therapeutic aim that consists of the diagnosis, treatment or cure of disease or ill health.
- Diagnosis is the starting point of medical care and the backdrop against which medical treatment takes place.
- Without a diagnosis, a treatment is not a response to a disease or a health disorder.
- Illuminate kept documents recording the initial consultation with its clients. These included a ‘diagnosis’ section.
- These were very cursory documents and could not be described as scientific.
- None of the diagnoses recorded any recognised health disorder.
- The treatments given by Illuminate were not for medical purposes but for non-medical, namely cosmetic, purposes.
- The fact that people went to the clinic feeling unhappy with some aspect of their appearance and may have been happier following a procedure did not mean that the treatment was medical or had a therapeutic aim.
- The services supplied were not those of medical care
Illuminate appealed to the Upper Tribunal (UT), which found that the FTT:
- Had been correct in seeking to identify the principal purpose of the supplies and had not made any error of law in this regard.
- The commercial and economic reality of the services provided should be considered, including from the customer’s perspective.
- Erred in law in placing no weight on the documents as evidencing a diagnosis by the clinic's doctor of any health disorders. This error might have made a difference to its decision.
- Should refer to a sample of initial consultation documents and consider individual supplies in context. Where a supply has both a therapeutic and a cosmetic purpose, it is necessary to identify the principal purpose.
The decision was set aside and remitted to the FTT.
Useful guides on this topic
Health and welfare: VAT
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Assessments: Best judgment & time limits
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Input VAT: What constitutes a valid claim (& VAT invoice)?
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Appeals: VAT
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