HM Revenue and Customs publish further information for dispensing doctors

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Dr Allan Tennant reports

20^th December 2006

HMRC issued further guidance on VAT and dispensing doctors on the 15^th of December 2006.

The major points to note are:

The date of payments received from the PCT and PPA are the dates that the income is used for VAT accounting purposes. The advice says "HMRC recognise that dispensing practices receive NHS payments for most of their goods and services up to three months after these supplies have been made. We also recognise that the majority of a practice’s taxable supplies will be zero-rated supplies of drugs and appliances. Accordingly, you may use the amounts shown on the two monthly statements - the Statement of Fees and the Dispensing Drugs Statement - to value your supplies of medical services and dispensed drugs made during the period. You can also use the date of the statements for the purposes of identifying the VAT return on which the income is to be declared and the period for making partial exemption calculations."

HMRC will issue a briefing in the near future regarding promotional cashback schemes. If you receive money from a manufacturer as part of a promotional ‘cash-back’ type scheme then you should follow the rules in Notice 700/7 Business promotion schemes, section 7.5.

Cost Rent/Notional Rent and The Global Sum can be apportioned to take account of payments that relate to dispensing (including dispensing staff salaries)

Members should watch out for Customs Officers who may insist that the exempt element of Dispensing Income should be calculated using their suggested method of  "marking up" the VAT allowance.  We know that the VAT allowance includes an allowance for Insulin, which is not an exempt administered drug, so the suggestion in the Information Sheet that this is one way to calculate the exempt administered drugs reimbursement will generally result in too high a figure being calculated. We recommend that the value of the reimbursements of administered drugs should be calculated by applying the ratio of purchases of administered drugs to the reimbursements received from the PPA.  So for example if 8% of the purchase of all drugs are drugs for administration, then 8% of the PPA reimbursements should be treated as exempt income.

We would like to thank John H Barnes AIIT, VAT Director, Baker Tilly for advice on news update.