CASE STUDY
The client
A two-partner practice in South East England received surplus ARRS funding, potentially pushing it over the VAT threshold.
The dilemma
For many medical practices, including the practice in this case study, there is no need to go through the hassle and expense of registering for VAT. However, when the Additional Roles Reimbursement Scheme (ARRS) was introduced in England in 2019, it brought with it potential VAT complications for unregistered practices.
This practice received £185,000 of ARRS funding, which included £23,000 surplus funding leading to the potential VAT issue.
While the bulk of the ARRS funding received was for the VAT-exempt roles of one physiotherapist and two clinical pharmacists, the practice also claimed 100% of the cost for some administrators, despite their time being split between care co-ordinators and other roles within the practice such as medical secretary.
A proportion of the surplus income was consequently potentially VAT-able and when combined with the practice’s other VAT-able income, posed a risk to the practice of needing to register for VAT.
Action required
“Our first step was to ask the practice for an estimated split of administration working time, so that we could apportion costs correctly between reimbursement via ARRS funding and the practice,” says Amy Ramsay, client manager at AISMA accountancy firm Honey Barrett.
“Doing this allowed us to look at how much of the ARRS funding received in relation to back-office staff time was potentially VAT-able,” she added.
In good news for the practice, the team at Honey Barrett calculated that the overclaim of funding, based on time and reimbursement, brought total VAT-able turnover below the VAT registration threshold.
With the agreement of the PCN, the practice was allowed to keep the overclaim, with no adjustment required.
The conclusion
In resolving this potential VAT issue, Honey Barrett was able to demonstrate to the practice the importance of accurate claiming for ARRS funding. “The practice has adjusted its claims processes to match only what is genuine ARRS time,” says Amy Ramsay. “This means there will be no nasty surprises down the line from overclaiming and needing to find the funds to reimburse the PCN.”
Honey Barrett Medical in association with AISMA.
