HMRC Locum Doctors VAT Changes 2026: What GPs, Locum Doctors and Medical Practices Need to Know

HMRC has announced significant changes to the VAT treatment of locum doctors, with new rules expected to take effect from 1 May 2027. The changes could affect GP locums, NHS healthcare providers, medical staffing agencies, umbrella companies and private healthcare organisations.

For self-employed locum doctors and those working through limited companies, understanding how these changes affect their contracts and VAT obligations is particularly important. A specialist GP locum accountant can help doctors review their working arrangements, understand potential VAT liabilities and prepare for the upcoming changes.

On 11 November 2026, HMRC published Revenue and Customs Brief 14 (2026), confirming plans to remove a specific VAT exemption covering the supply of registered locum doctors.

The announcement follows the Isle of Wight NHS Foundation Trust v HMRC tribunal decision, which extended the interpretation of an existing VAT exemption to certain supplies of locum medical staff.

So, what exactly is changing, who will be affected, and what should locum doctors and GP practices do now?

1. What Are the New HMRC VAT Rules for Locum Doctors?

Under the existing legislation, Item 5 of Group 7, Schedule 9 of the VAT Act 1994 provides a VAT exemption for the supply of a deputy for a registered medical practitioner.

Historically, HMRC interpreted this exemption as applying mainly to medical deputising services, such as GP out-of-hours care.

However, following the 2025 Isle of Wight tribunal decision, HMRC accepted that qualifying supplies of GMC-registered locum doctors could also fall within the exemption, including supplies arranged through employment businesses.

At Budget 2026, the government announced plans to repeal Item 5, effective from 1 May 2027.

This means:

• Until 30 April 2027, qualifying supplies of registered locum doctors can continue to benefit from the existing VAT exemption.
• From 1 May 2027, supplies that constitute medical staffing services will generally become subject to standard-rated VAT, currently 20%, where the supplier is required to charge VAT.
• Qualifying medical-care services will continue to benefit from existing VAT exemptions.

The key distinction is whether the business is supplying medical staff or providing medical care directly.

The repeal is proposed to take effect on 1 May 2027; it does not change the VAT treatment of qualifying supplies before that date. The general exemption for qualifying medical care remains separate from the medical deputy exemption being repealed.

2. Will Self-Employed GP Locums Have to Charge VAT?

Not necessarily.

One of the most important points for self-employed GP locums is that the changes do not automatically mean every locum doctor must start charging 20% VAT.

HMRC distinguishes between the supply of medical staff and the supply of medical care.

For example, where an agency supplies a registered doctor to a GP practice and the practice directs and controls the doctor’s work, this may be treated as a supply of staff.

Under the announced rules, these supplies will generally become standard-rated from May 2027.

However, where a doctor or medical service provider delivers qualifying medical care, the medical-care VAT exemption may continue to apply.

This means that self-employed doctors providing qualifying medical services should not automatically assume their income will become VATable.

For locum doctors operating through personal service companies or limited companies, the position may be more complicated.

The VAT treatment will depend on the contractual arrangements, the services being supplied and who is responsible for delivering patient care.

A contract describing the work as “medical services” does not, by itself, establish VAT exemption. The actual responsibilities, control and nature of the supply must support that treatment.

What should GP locums do?

Review your locum contracts and invoices to establish whether you are providing medical-care services or supplying medical staff.

If you work through a limited company, consider seeking advice from a specialist GP locum accountant before changing your VAT arrangements.

3. How Will the VAT Changes Affect GP Practices and NHS Providers?

GP practices and NHS healthcare organisations often rely on locum doctors to manage staffing shortages, sickness cover and additional patient demand.

The changes could increase the cost of temporary medical staffing where agencies or other suppliers are required to add VAT to their invoices.

For example, suppose a GP practice currently pays £1,500 for locum staffing services.

If the GP practice cannot recover the VAT, the additional £300 becomes a direct business cost.

For practices using locum doctors regularly, this could have a noticeable impact on annual expenditure and profitability.

However, the actual cost depends on existing contractual arrangements, the supplier’s VAT position and the healthcare organisation’s entitlement to recover VAT.

Some NHS bodies have specific VAT recovery arrangements, so the additional VAT will not necessarily represent an irrecoverable cost in every situation.

Primary Care Networks (PCNs) should also review their arrangements. Where a lead practice, federation or other body employs clinicians and recharges staff costs to member practices, those recharges may constitute standard-rated staff supplies. The locum deputy exemption does not automatically cover all PCN staff, and its repeal does not automatically make every PCN funding transfer VATable. Properly documented disclosed-agency or funds-held-on-trust arrangements may have a different VAT outcome, while separate administration fees require their own assessment.

What should GP practices do?

Review existing locum agency agreements, estimate the potential VAT exposure and incorporate the expected costs into financial forecasts for 2027/28.

Practices should also check whether agency fees are quoted inclusive or exclusive of VAT.

For further financial planning considerations, read our article on Autumn Budget 2026: What It Means for GPs and NHS Doctors.

4. What Does the Announcement Mean for Medical Staffing Agencies?

Medical staffing agencies, employment businesses and umbrella companies are among the businesses most directly affected by HMRC’s announcement.

Following the Isle of Wight tribunal decision, qualifying supplies of registered locum doctors may currently benefit from VAT exemption.

However, from 1 May 2027, the specific exemption permitting this treatment is due to be removed.

Agencies should therefore review their contracts, pricing and VAT arrangements before the changes take effect.

Important areas to consider include:

• VAT registration: Determine whether the revised treatment affects taxable turnover and VAT registration obligations.
• Agency pricing: Review whether 20% VAT will need to be added to existing charges.
• Existing contracts: Check whether contracts allow VAT to be charged separately.
• Cash-flow management: Understand how the collection and payment of VAT will affect working capital.
• Input VAT recovery: Review whether the change in VAT status affects VAT recovery on business expenses.

Businesses supplying different categories of healthcare professionals should also recognise that the existing Item 5 exemption is specific to qualifying registered medical practitioners.

It does not automatically apply to the supply of nurses, physician associates, anaesthesia associates or other healthcare professionals.

5. Can Locum Doctor Staffing Businesses Claim Back Previously Paid VAT?

Potentially, yes.

One of the important points in HMRC’s latest announcement is that the planned repeal will not remove the ability to make eligible claims for VAT previously overdeclared on qualifying supplies of locum doctors.

Following the Isle of Wight tribunal decision, some businesses that previously charged standard-rated VAT may be entitled to claim a refund.

HMRC’s Revenue and Customs Brief 6 (2026) explains that claims may be possible where:

• The business supplied qualifying locum doctors.
• It previously charged output VAT at the standard rate.
• The supplies should have been treated as VAT-exempt.
• The VAT relates to supplies within the applicable four-year claim period.

However, there are important restrictions.

Only the person or business that made the supply and accounted for the output VAT can make the refund claim.

In addition, businesses may need to adjust input VAT previously recovered on expenses associated with exempt supplies.

HMRC will also consider partial exemption rules and whether repayment would result in unjust enrichment.

Depending on the circumstances, businesses can correct their VAT returns or submit a formal error correction notification using form VAT652.

HMRC has provided a dedicated email address for relevant claims: ccg.locumdoctorsclaim@hmrc.gov.uk.

Businesses considering historic claims should review their calculations and supporting evidence carefully before making a submission.

GP practices that paid VAT to an agency should normally approach the supplier about any correction and credit note. The practice cannot simply claim the agency’s overdeclared output VAT from HMRC. Refunds may also require adjustments to previously recovered input VAT and consideration of unjust enrichment.

6. What Should Locum Doctors Working Through Limited Companies Consider?

Many locum doctors operate through different arrangements, including self-employment, limited companies, agencies and umbrella companies.

The new VAT announcement makes it particularly important to understand the distinction between the contractual supplier and the individual doctor performing the work.

For example, if a limited company contracts to supply a doctor to a healthcare organisation, the VAT treatment may differ from a contract under which the company is responsible for providing qualifying medical care.

A limited company should not automatically assume that all its medical-related income is exempt from VAT.

Equally, the repeal does not mean all income earned by a locum doctor becomes subject to VAT.

VAT registration threshold: the current UK threshold is £90,000 of taxable turnover. Exempt medical-care income does not count towards this threshold, but standard-rated staffing income does. For example, a company earning £120,000 solely from qualifying exempt medical care would not have to register on that income alone; a company earning £120,000 from taxable staff supplies may need to register and charge VAT. Registration depends on the rolling 12-month test and the separate 30-day forward-looking test; the change does not necessarily trigger registration automatically on 1 May 2027. The threshold and legislation should be checked again before implementation.

Key considerations for limited company locum doctors include:

• Reviewing the nature of existing contracts.
• Understanding whether supplies are classified as staffing or medical care.
• Assessing whether taxable turnover creates VAT registration obligations.
• Checking invoicing arrangements and future contract terms.
• Understanding how VAT interacts with business expenses and input VAT recovery.

Doctors should also continue reviewing their wider tax arrangements, including Corporation Tax, Self Assessment, IR35 and NHS pension contributions where relevant.

These matters are separate from the new VAT rules but remain important when managing locum income.

7. How Can Specialist Locum Doctor Accountants Help?

Changes to VAT legislation can create uncertainty for medical professionals, particularly when working arrangements involve multiple practices, different contracts or limited company structures.

Specialist locum doctor accountants can help identify the accounting and tax consequences of different working arrangements and ensure that any changes to VAT reporting reflect the services actually supplied.

At SIAL Accountants, our healthcare accounting services cover areas such as:

• VAT compliance and review of relevant invoicing arrangements.
• Self Assessment and tax planning for self-employed locum doctors.
• Limited company accounts, Corporation Tax and payroll.
• IR35 and employment-status considerations.
• NHS pension and superannuation-related tax matters.
• Allowable business expenses and financial planning.
• Support with assessing potential historical VAT corrections and refund claims.

Working with experienced locum accountants can also help doctors manage fluctuating income and maintain accurate financial records throughout the tax year.

You can learn more about our dedicated accounting services for salaried GPs and locum doctors.

8. What Should Locum Doctors and GP Practices Do Before May 2027?

Although the new rules are not scheduled to take effect until 1 May 2027, reviewing your position early could help avoid unexpected costs or reporting problems.

For self-employed GP locums: Check your contracts and whether your income represents a supply of medical care or medical staffing.

For locum doctors with limited companies: Review VAT registration, invoicing and the terms of agreements with agencies and healthcare providers.

For GP practices: Estimate any additional VAT costs associated with agency locum cover and review financial forecasts.

For staffing agencies and umbrella companies: Prepare pricing and VAT reporting systems for the planned changes and consider whether historic VAT correction claims are available.

Businesses with potential refund claims should also be mindful of the applicable four-year time limit.

For PCNs: review staff secondments and recharges, the nominated payee’s role, any funds held on trust and separately charged management fees.

Frequently Asked Questions About Locum Doctors and VAT

Do GP locum doctors need to register for VAT from May 2027?

Not automatically. VAT registration depends on the nature of the supplies made, the level of taxable turnover and the applicable VAT registration rules. Qualifying medical-care services can remain exempt even after the new rules take effect.

The current registration threshold is £90,000 of taxable turnover; exempt medical-care income is excluded. The rolling 12-month and forward-looking registration tests still apply.

Does the new 20% VAT rule apply to all locum doctors?

No. HMRC’s announcement concerns the removal of a specific VAT exemption for supplies of a deputy for a registered medical practitioner. Qualifying medical-care services will continue to be exempt under other provisions.

Can a locum doctor working through a limited company remain VAT-exempt?

Potentially. The VAT treatment depends on what the company supplies, who is responsible for delivering medical care and the contractual arrangements. Each situation should be reviewed individually.

Why should I use a specialist GP locum accountant?

A specialist GP locum accountant can help with the tax and accounting issues commonly faced by locum doctors, including multiple income sources, limited company accounts, VAT, allowable expenses, NHS pension tax considerations and IR35.

Can locum staffing agencies still claim historic VAT refunds?

Yes, where the relevant eligibility conditions are met. HMRC has confirmed that the planned repeal will not affect eligible historic claims arising from the Isle of Wight decision. Claims are subject to the relevant time limits and adjustments.

How Can SIAL Accountants Help Locum Doctors and GP Practices?

As specialist healthcare accountants, SIAL Accountants provides accounting and tax services for GP locums, salaried GPs, NHS doctors and medical practices.

We understand the financial challenges associated with locum work, including variable income, different contractual arrangements, VAT obligations, NHS pensions and ongoing tax compliance.

Whether you are a self-employed GP locum, operate through a limited company or manage a GP practice employing temporary medical staff, we can help you understand your tax position and prepare for the forthcoming VAT changes.

If you are looking for experienced locum accountants or need specialist advice from a GP locum accountant, contact SIAL Accountants to discuss your circumstances.

Contact SIAL Accountants

Website: www.sial-accountants.co.uk

Telephone: 0208 532 9999

Email: info@sial-accountants.co.uk

Explore our specialist accounting services for locum doctors and salaried GPs.

Official HMRC Sources

• Revenue and Customs Brief 14 (2026): VAT Treatment of a Deputy for a Medical Practitioner
• Revenue and Customs Brief 6 (2026): VAT Liability of Temporary Medical Staff

General information as at 12 November 2026. The repeal is announced for 1 May 2027, subject to the relevant legislation taking effect. Individual VAT and tax obligations depend on contractual arrangements and personal circumstances. Professional advice should be obtained before changing existing VAT treatment.