The Autumn Budget included several VAT announcements with implications for the NHS, ranging from changes to the VAT treatment of temporary medical staff and donated medicines to future e-invoicing requirements.
We have summarised below the key changes for NHS finance teams, together with a couple of important HMRC developments announced shortly after the Budget.
Temporary Staffing
The current VAT exemption for temporary supplies of medical deputies follows the decision in Isle of Wight NHS Foundation Trust v HMRC, where the First-tier Tribunal found that the exemption could apply to qualifying supplies of locum doctors, including those supplied by employment businesses. HMRC subsequently confirmed that it would not appeal against the decision and accepted that supplies of GMC-registered locum doctors may qualify for exemption under the legislation as it currently stands.
The current exemption is proving temporary too, with the Government confirming that it will be removed from 1 May 2027. From that date, supplies of medical deputies that are supplies of staff will be subject to VAT at the standard rate. This will be particularly relevant to NHS Trusts with significant agency locum expenditure, where the change could increase irrecoverable VAT costs.
Importantly, the change does not remove the VAT exemption for genuine supplies of medical care. Deputising services that primarily constitute medical care, such as out-of-hours deputising services, can continue to be exempt. The VAT treatment will therefore depend on whether the arrangement is a supply of staff or a supply of medical care.
The legislative change is prospective and does not remove the opportunity to pursue claims relating to VAT previously charged on qualifying locum doctor supplies. HMRC has confirmed that claims under the existing legislation are being considered on a case-by-case basis. Claims must be made by the suppliers of locum doctors and are subject to the normal four-year time limit, unjust enrichment, partial exemption, and VAT treatment across the supply chain.
NHS Trusts who have been charged VAT by the suppliers are entitled to a “credit” of the VAT they have paid in the last four years. CRSTAX is working with numerous NHS Trusts to ensure they receive the VAT credits they are entitled to. Please contact us if your Trust needs assistance in securing its VAT credit.
VAT zero-rate for donated medicines
From 23 June 2026, a new VAT zero rate applies to certain medicines supplied free of charge, including medicines donated for NHS treatment, medicines provided through the Early Access to Medicines Scheme, medicines used in clinical trials and, in qualifying circumstances, continued treatment following a clinical trial.
Previously, pharmaceutical companies providing medicines free of charge could still be required to account for VAT on the value of the medicines supplied. The new zero rate removes this VAT cost where the relevant conditions are met, including where medicines are donated to the NHS or to another organisation providing treatment commissioned or funded by the NHS.
For NHS organisations, this does not create a new VAT recovery entitlement but should ensure that qualifying free-of-charge medicine arrangements do not incur an unexpected VAT side effect. HMRC has also confirmed that VAT previously accounted for on qualifying supplies from 23 June 2026 can be corrected, subject to the relevant requirements.
Making Tax Digital and Section 41 reform
Separately from the Budget announcements, HMRC issued a letter shortly afterwards confirming that NHS Trusts and other public bodies using the GIANT system will not be required to move to Making Tax Digital for VAT until at least April 2028, extending the previous deferral from April 2027. Trusts should continue submitting their VAT returns in the same way in the meantime.
The same letter also provides a welcome update on potential Section 41 reform, confirming that HM Treasury continues to explore reform of the VAT refund system, including a potential “Full Refund Model” that would allow Section 41 bodies to recover VAT on all goods and services incurred in their non-business activities. Further details are expected in due course.
E-invoicing
From 1 April 2029, VAT invoices will need to be issued electronically under new e-invoicing requirements. The changes will apply to public bodies, including NHS organisations, with the detailed policy and technical requirements to be confirmed ahead of implementation.
For NHS organisations, the long lead-in provides time to consider the changes as part of future developments in finance, procurement and invoicing systems.
VAT on public electric vehicle charging
From 1 November 2026, electricity supplied through publicly accessible electric vehicle charging points is specifically excluded from the VAT relief available for domestic electricity and is therefore subject to VAT at the standard rate. The change provides legislative certainty over the VAT treatment of public EV charging following previous uncertainty in this area.
Importantly, the standard rate applies even when the electricity supplied falls below the normal 1,000 kWh per month threshold for domestic use.
For NHS organisations operating publicly accessible EV charging points across their estates, the change provides welcome clarity that electricity supplied through those charging points should be treated as standard-rated for VAT purposes.
The VAT liability of supplies made to 31 October 2026 remains subject to litigation. In TC/2024/01983 Charge My Street, the First-tier Tribunal ruled against HMRC and found that the reduced rate should apply. HMRC intends to appeal. The legislative change in the Budget will require standard-rate VAT to be charged from 1 November 2026, separately from the dispute over earlier supplies.
It is possible that the litigation will mean that the reduced rate (or temporary zero rate) applies until 31 October, and therefore four-year repayment claims for overpaid VAT (and therefore CCL) are possible until the temporary zero rate started on 1 October.
Temporary VAT zero-rate on electricity
The temporary 0% VAT rate for qualifying domestic electricity supplies in Great Britain, introduced from 1 October 2026, has been extended by a further three months and will now apply until 30 June 2027. The extension does not change which supplies qualify for the relief.
For NHS organisations, the relief may be relevant where electricity is supplied to residential accommodation within the NHS estate, provided the existing conditions for domestic use are met.
Zero-rate on land sold to social housing providers
From 1 April 2027, a new VAT zero rate will apply to land sold to registered providers of social housing, including qualifying housing associations. The change is intended to simplify the VAT treatment of these transactions and reduce the need for more complex “golden brick” arrangements.
For NHS organisations considering the disposal of surplus land, the change could therefore be particularly relevant where the prospective purchaser is a registered provider of social housing. Secondary legislation and further HMRC guidance are expected before the new rules take effect.
VAT changes following the abolition of NHS England
Following the planned abolition of NHS England and the transfer of its functions to the Department of Health and Social Care, consequential changes will be made to the VAT legislation.
The changes are intended to ensure that existing VAT reliefs continue to apply following the restructure, rather than introducing new reliefs or changing the existing VAT treatment. For NHS organisations, this should therefore largely be business as usual from a VAT perspective, with the legislation being updated to reflect the new NHS structure. The changes will take effect from a future date to be specified by HM Treasury.