VAT on unborn baby scans? Tax tribunal states its case

Are you taxed before you even come into the world? This was a question presented at a recent court hearing - the First-tier Tax Tribunal has confirmed that private ultrasound scans offering complementary services to those provided on the NHS still qualify as a VAT exempt supply of healthcare. Medical clinics offering ‘non-essential’ services should check that their registrations and contracts are up to HMRC scrutiny.

‘Window To The Womb’ is a chain of franchised high street clinics offering a range of private ultrasound scan packages to pregnant women including 4-D images. They can be purchased to supplement those normally offered under NHS antenatal care, perhaps by parents seeking extra reassurance or confirmation about the baby’s growth, health and wellbeing, gender and single or multiple pregnancy, or to check the baby’s position to help plan delivery options.

Customers can include a more general pre-birth bonding experience in their scan appointments. Guests can join and high-quality photos and videos of the scan can be taken away. Some franchisees also offered an early pregnancy scan, largely aimed at women who have had fertility treatment abroad.

Each clinic is registered with the Care Quality Commission and employs sonographers, who are registered members of the Society of Radiographers, to carry out the scans. The clinics do not check for all the abnormalities covered by the NHS scanning programme and do not offer treatment after a scan – instead they refer pregnant women who may need medical intervention to the NHS.

A dispute arose with HMRC over the VAT position of the service. Whilst HMRC accepted that the sonographers were registered medical professionals, it took the view that the overall service provided by the clinic was not ‘medical care’ because the main purpose was the production of the images and hence the service should be subject to VAT at 20 per cent.

The First-tier Tax Tribunal has allowed the clinics’ appeal, finding that the services qualified for VAT exemption as medical care.

The tribunal considered the VAT position of each package offered by the clinics, and noted that in each case, the principal aim of a typical customer paying for a scan was to enable a sonographer to diagnose and monitor a medical condition i.e. to confirm pregnancy and identify any associated medical issues. Even if the need for such a scan may not be clinically indicated or it was also available through the NHS, the tribunal found the service was nevertheless exempt as a supply of medical care.

The tribunal commented that the position was not as clear for the clinics’ more extensive package providing a well-being and gender scan, with high-quality imagery. While it thought that some customers might buy this principally for the enhanced imagery, the tribunal found that most were principally concerned with whether the foetus was healthy. Therefore, this was also exempt healthcare.
Following case law in the European courts, which has restricted the health exemption for cosmetic procedures, HMRC has often taken the argument a step further by arguing that a ‘non-essential’ health-related service does not qualify for the exemption, despite being clinical in nature.

Private providers should protect their position by making sure their business and employees hold the appropriate medical registrations and that the medical care properties of their service are clearly described in contracts and advertising.