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Introduction to the sector

Eligible NHS bodies will provide the majority of their healthcare services under statutory regulation and these activities are treated as non-business activities for VAT purposes. VAT exemption can, in principle, apply to medical care provided by an NHS hospital but because in practice its care and treatment is typically not regarded as a business activity, the VAT exemption rarely needs to be considered. However, many of the business activities carried out by private hospitals and certain other health institutions (such as state-regulated hospices and nursing homes) can be exempt from VAT if they meet the conditions for the healthcare exemption.

As well as determining the VAT liability of their core activities, VAT recovery is incredibly important for the sector. For those organisations with a mixture of exempt and taxable activities it will be important to consider partial exemption. NHS bodies will need to consider the special VAT refund rules that apply for contracted out services and which allow NHS bodies to recover VAT on certain