What is the Nursing Agencies Concession & why does it matter?
The Nursing Agencies Concession was brought in to reduce the cost of supplying medical staff. It exempts agencies from charging VAT on to the end-hirer or NHS Trust, where the contractors supplied are registered nurses, unregistered nurses working under the supervision of registered nurses or nursing auxiliaries (where services form part of patient medical care).
For more information regarding the Nursing Agencies Concession and its importance, please visit this link.
Does it apply to Umbrella companies?
No. This does not apply to Umbrella companies supplying services of staff to a recruitment agency.
It only applies to the direct provision of staff. For example nurses and nursing auxiliaries to a health provider by a business acting as a principal. It also cannot apply where input tax is recovered by the supplier on related costs because that is not consistent with exemption.
This means that an Umbrella company supplying nursing staff to a recruitment agency must charge VAT.
So, what is the problem?
The problem is that the end-user or NHS Trust quite rightly would not expect to pay VAT due to the Nursing Agencies Concession. So an agency could be in a position where they must pay VAT to their suppliers (if they are using an Umbrella solution) but cannot then pass that cost onto the end-hirer.
Why is this an issue now?
Since IR35 legislation was introduced, many nursing staff who were previously working through their own limited companies have had to switch to using an Umbrella solution. This has resulted in many agencies now using an Umbrella payroll supplier, so must charge VAT on their invoices.