VAT and Care Homes – Exempt status and voluntary registration

Care homes are residential facilities that provide accommodation, personal care and support for people who require assistance with daily activities. These activities can include bathing, dressing, eating, and managing medications. Care homes are usually operated by private companies, local councils, or charitable organisations.

The goal of care homes is to create a safe and supportive environment where residents can receive the care they need while maintaining as much independence as possible.

Do care homes need to charge VAT?

The provision of care by regulated care homes is exempt from VAT.

VAT exemption, as opposed to zero-rating, means that VAT is not charged on the supply to customers, but the care home can’t reclaim any VAT incurred on the costs.

Because the provision of care or treatment is a VAT-exempt supply, care homes are not generally able to register for VAT and, therefore, cannot reclaim VAT incurred on expenditure.

What about other goods sold by care homes?

While the primary service of treatment and care is exempt from VAT, some care homes have additional or secondary income sources that are subject to VAT, such as the sale of confectionery, toiletries, cards, and stationery.

This income does enable a care home to register for VAT on a voluntary basis. Voluntary VAT registration is allowed even if the taxable turnover is less than the £90,000 VAT threshold.

However, for the majority of care homes, charging VAT on sales to residents and visitors outweighs the ability to reclaim VAT on some expenditures.

Other opportunities

There are opportunities for a care home group to register for VAT and reclaim, in some cases, large amounts of VAT. However, due to the complexity of the process, a care home group would need to seek professional advice from a VAT expert to establish whether this is feasible.