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Premises and VAT

We are two independent partnerships co-owning practice premises. We have a budget of £860,000 to modify and extend the premises. As we are not registered for VAT, a large lump sum will go to HM Revenue & Customs. Is there any way we can minimise the VAT we have to pay? We do not exceed the registration threshold but I understand we still have the option to register. I wonder if it would be worth it to be able to claim back the VAT on the building/project costs. What do you think?

GPs are not required to register for VAT as most of their services are exempt from VAT. However you can voluntarily register so that you can recover some of the VAT on the building costs.

You would not be able to recover the full amount because of the exempt services you offer, but a claim could be made under the partial exemption rules.

Once you are registered you need to charge VAT on services where the principal purpose is not to treat patients but to enable a third party to make a decision. You will also need to add VAT to any service charges the practices make for hiring out rooms.

A disadvantage of becoming VAT registered is the increased administration burden of completing and submitting quarterly VAT returns by relevant deadlines. I suggest you consult a VAT specialist who will be able to advise you on the percentage of VAT you are likely to recover and whether registering is really worthwhile.

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