It may seem to be stating the obvious but one would not expect VAT to apply to care services provided to the elderly and infirm.

This is normally the case in respect of welfare services provided by public bodies and charities. However, the question is: which "care" services qualify for VAT exemption?

Up to now, Customs' view was that only personal care such as bathing, dressing or feeding was VAT-free. Yet those who require assistance with these tasks are also likely to need much wider help covering cleaning, cooking and shopping.

The VAT Tribunal has recognised the reality of this situation, ruling that all care supplied to those with "a current or imminent substantial risk to health and welfare" by charities and similar bodies should qualify for VAT exemption.

Customs accepted this while stressing that it must be limited to those assessed by Social Services as having a high level of need.

A consultation process has been announced but charities which provide domestic care services need to consider their situation now. They can apply for VAT exemption with immediate effect or wait until the findings of the consultation exercise are announced next year.

Some charities may have overpaid large amounts of VAT to Customs & Excise and be eligible for a refund.

Terry Parkinson is VAT partner with BKR Haines Watts chartered accountants.

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