Advanced Hair Technology Ltd v HMRC First Tier Tribunal decision was released in January 2025. The VAT position for cosmetic and aesthetic businesses in the UK was shaken as a result.
What was it about?
Advanced Hair Technology Ltd (AHT) is a well-established clinic with an online profile specialising in hair transplants. HMRC’s Hidden Economy team investigated and argued the clinic’s services were standard rated for VAT and the exempt treatment of income treated as medical care was incorrect. HMRC backdated their VAT registration to 2007, resulting in a substantial liability to the company.
The Tribunals Decision:
The First-tier Tribunal (FTT) agreed with HMRC and decided that although hair loss (androgenetic alopecia) can be classified as a disorder, the hair transplants were performed for cosmetic rather than medical reasons. They ruled that the exemption under medical care did not apply, and the procedures were standard rated VAT.
Penalty Position:
HMRC did agree to drop the penalty for failure to register for VAT and recognised that the business had relied on incorrect professional advice.
What are the implications from this decision?
The ruling reinforces a clear trend in numerous prior cases (Ultralase Medical Aesthetics Ltd, Epem Ltd, Skin Rich Ltd. etc.) which confirms that unless the principal purpose is for demonstrative medical reasons, cosmetic procedures will generally be standard rated. Staff who are CQC registered or GMC qualified do not provide an automatic exemption to the services they provide.
Looking forward:
For businesses that operate in these sectors it is imperative that they are able to evidence each exempt treatment is genuinely medical care and look at each on a case-by-case basis. Keep strong medical records and awareness that HMRC can and will pursue retrospective VAT in cases they believe exempt treatment has been wrongfully applied.
What the future holds:
Advanced Hair Technology has appealed to the Upper Tribunal (UT). The case has been registered and whilst a date has not yet been set, a hearing will take place in London and is expected in 2026. A final decision could give further clarity on where the line falls between cosmetic and medical treatments for VAT purposes.
If you are affected by VAT matters related to this subject, please do not hesitate to contact the Xeinadin VAT team for advice.
