Welcome to Understanding how VAT can improve Your Practice By Jim Mandeville

Heading here... Sub-heading here... Body text here... As you can see we are largest GP dispensing Doctor membership organisation in the UK something we are very proud of. Having this level of buying power ensures we can bring you and your practices the best deals and in turn maximise your profitability. On average our members realise a new profit of between 37-42%

Our generic offering Active Price Management know as APM gives you numerous benefits as outlined but most importantly gives you back time, money and increased profit for you and your practice

Welcome As you can see there are many benefits to your membership with PSUK – From enhanced & competitive discounts, to bespoke advice on prescribing and purchasing, through to clinical support from pharmacists and Proscript connect our aim is to maximize the value we bring and in turn become a real value partner.

The event you are about to experience is one of over 40+ we deliver every year across the country and I know you will take a great deal of value from the workshop today. So it gives me great pleasure to introduce our speaker for today please give a warm welcome to………

VAT – a tax on trading receipts

Areas to consider: Basic principles of VAT The concept of VAT as a tax Accounting requirements – categories of income and expenses Exemptions cash v invoice accounting Partial exemption Including the de-minimis rule Personally administered items Making tax digital Strategic planning

Basic principles Business income is liable to VAT Referred to as ‘output tax’ VAT is paid to suppliers on business costs Referred to as ‘input tax’ VAT office are paid the excess of the output tax over the Input Tax (or repay where Input exceeds Output)

VAT income structure

Zero rated practice income VATA 1994 Sch 8 Group 12 zero rates: Drugs supplied to an individual for personal use on NHS prescription This does not include drugs on private prescription Personally administered items excluded (Exempt - (Dr Benyon and Partners)) Drugs supplied to an individual on any prescription when dispensed by a pharmacist This does include drugs on private prescription

Exempt practice income VATA 1994 Sch 9 Group 7 exempts: Provision of services by medical professionals where ALL of the following are met: Services consist of care, diagnosis treatment or assessment of a patient, and The services are within the discipline you are registered to practice, and The service requires the application of the knowledge, skill and judgement acquired in the course of your professional training BUT the European Court of Justice REQUIRES purpose of work to be for the patients health

ECJ change of emphasis Health exemption applies to: Services within the profession you are registered to practice where The PRIMARY PURPOSE of the services is the protection, maintenance or restoration of the health of the person concerned This is important bearing in mind the changes to NHS contracts and CCG incomes etc.

Accounting Requirements Practice records need to identify income under the following categories: Exempt services E.g. healthcare, administered drugs, NHS reimbursements Zero rated income NHS dispensing Standard rated income Note this does not include supplier retrospective discounts Items outside scope of VAT Including Hospital salaries, donations, interest received, note copy fees

Accounting Requirements Practice records need to identify expenditure under the following categories according to which income the cost relates to: Expenses wholly attributable to exempt income E.g. medical consumables, PA drug purchases Zero rated income NHS dispensing drug purchases and costs Standard rated income Non attributable expenses i.e. those relating to all parts of the practice E.g. cleaning costs, stationery, repairs, light/heat Items outside scope of VAT Including salaries, donations, interest paid

Accounting Requirements Choice of accounting method? Cash accounting OK if taxable sales lass than £1.35m Income recorded by date received. Expenses recorded by date paid. Invoice accounting The standard method – compulsory for higher taxable sales. VAT due on sales by date invoiced. Expenses VAT claimed by date incurred not date paid. Cash flow advantage from invoice accounting.

VAT Accounting Chart

Partial exemption and de-minimis rule Full recovery available where: total exempt input tax <£7,500, and, total taxable VAT allocated to taxable business more than 50% of total Likely losers to de-minimis rule are: administered drugs over £20,000 p.a. Those with small dispensing lists v prescribing lists Large practices generally

Monthly partial exemption

Personally Administered Items supplied and administered by the practice which are – Part of the overall NHS care Supplied in single dose Not taken away by the patient as normal dispensing Still old ‘Red Book’ categories – Injections Skin closure/sutures Anaesthetics Contraceptive devices Limited list of reagents

Personally Administered So what do you identify as personally administered ?

Example – Zoladex LA £ Income Basic 235.00 Clawback (26.27) VAT allowance 41.75 Dispensing fee - estimated 1.90 Total income £252.38 Cost List price less 22% discount 183.30 VAT 36.66 Total cost £219.96 Profit? £32.42 (OR ? £69.08)

Making tax digital Phasing in from April 2019 VAT is first tax to be included Needs on line submission of data Most computer accounts will do this

Making tax digital Need to register using existing VAT log on details Will apply from date of registration Adjustments to VAT will be made through the accounts system

Strategic planning What is best approach for income How to minimise expenses If near to de-minimis – watch progress Monthly VAT accounting Strategy for PA items Strategy for suppliers

PSUK Services PSUK can guide and inform your practice by providing the following information and services as part of your PSUK membership; Pharmaceutical Purchasing, Product Information, PSUK Schemes Stationery/Medical Equip & Consumable Purchasing Further Training – selection of topics and further assistance can be provided Health & Safety Assistance Surgery Insurance & Locum Cover Stocktaking Service Many more... If you would like further information on the above and how your PSUK Membership can benefit your practice please contact PSUK directly on 01904 558350 or via enquiries@psuk.co.uk

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