How Will the New VAT Rulings Affect the Cosmetic Industry?

October 2011 saw the publication in several national newspapers of government plans to add VAT to cosmetic surgery. These articles claimed that this would lead to a 20% increase in the cost of procedures as surgeons would be forced to pass the VAT increase on to their patients. However, there is some ambiguity over the proposed changes and whether they will even happen.

In this blog post, I'll be looking more closely at the reported changes and deciding what they mean for the future prices of cosmetic procedures in the United Kingdom.

The Media Outcry

The autumn of 2011 saw many media articles reporting that the government was aiming to make around £500 million a year by adding VAT to cosmetic procedures. In effect, prices would rise by 20%. The tabloids were quick to label this new legislation a "boob tax" and the subsequent inevitable barrage of articles that followed, featured in national newspapers such as the Daily Mail and Guardian, claimed that the cosmetic surgery industry was angry about the change and the potential negative effect it could have on their business.

What does the Government say?

Interestingly HM Revenues and Customs say that there has been "no change in government policy on VAT for cosmetic surgery" and the supposed new guidelines were simply a clarification of existing laws.

So what is the existing law on cosmetic surgery and VAT? Cosmetic procedures that are carried out for medical reasons do not attract VAT but procedures carried out for purely aesthetic reasons should be subject to VAT. However, the distinction between the two is ambiguous as surgery for therapeutic reasons can also be classed as medical so would not be taxed. HM Revenues and Customs also say that each case is treated on its individual merits meaning a rubber stamp cannot be placed on any single cosmetic procedure. 

What do the Surgeons say?

Many in the cosmetic industry have hit back at HM Revenues and Custom’s claim that the law has not been changed, arguing that the clarification of the guidelines is tantamount to a change in law. Until now many cosmetic surgeons have not been charging VAT on their patients irrespective of the treatment they undergo.

So will prices Increase?

The crux of the matter seems to boil down to the interpretation of the current law. The taxman states that non-medical cosmetic procedures should attract VAT and always should have in the past whereas surgeons claim this is not the case. If the clarification by the government does lead to the VAT being enforced then the majority of cosmetic procedures will incur a 20% VAT charge. Of course loopholes may appear especially as HM Revenues and Customers admit that each case should be treated individually. For example, a person with a bulbous nose could argue that they feel depressed with their appearance and this is leaving them psychologically distressed. A Rhinoplasty, therefore, could technically be seen as a medical necessity rather than an aesthetical procedure.

It seems there is much confusion over the supposed new changes in taxes relating to cosmetic procedures. Whilst the government argues that no law change has been made surgeons argue if the guidelines are enforced prices will have to rise. It therefore, remains to be seen whether the government will indeed push forward these new guidelines as law or whether surgeons will still be able to offer cosmetic procedures tax free in the future.