Paying someone who is not registered for VAT is perfectly allowed in the UK, provided their taxable turnover stays below the government’s threshold. Currently, the threshold is £90,000, and it is confirmed to remain at this level for the 2026/27 tax year.
However, in the healthcare sector, you have to be careful. If the service they are providing doesn’t fall under the specific HMRC medical exemption rule, you might still have responsibilities to consider, especially if your own clinic is partially exempt.
In this guide, we’ll break down everything you need to know about paying someone who is not VAT registered.
You’ll get to know:
- What does “not registered for VAT” mean?
- Is it okay to hire a medical professional who is not VAT registered?
- What should you do before paying someone who is not registered for VAT?
- And much more…
Let’s break it down!
What Does ‘Not Registered for VAT’ Mean?
When a business or self‑employed person is not registered for VAT, it usually means their taxable turnover is below the VAT registration threshold, or they haven’t voluntarily registered yet. For the 2025/26 and 2026/27 tax years, the UK VAT registration threshold is £90,000 of taxable turnover in any rolling 12-month period. Below this level, registration is normally optional for UK‑based businesses providing standard or zero‑rated supplies.
Not registered for VAT does not always mean “small business”. In healthcare, it can also mean the person mainly supplies VAT-exempt services, so registration may not be required at all.
Is It Okay to Hire a Medical Professional Who Is Not Registered for VAT?
It is completely fine. In the UK, registration only becomes mandatory once a person’s taxable turnover goes over the limit. Many part-time locums, therapists, or new consultants stay well under that £90,000 mark.
When you pay someone who is not registered for VAT, you simply pay the gross amount on the invoice. You won’t be able to “claim back” any VAT because none was charged in the first place.
For a lot of private practices, this is actually preferred because it keeps the total cost of the service down.
Why Are Some Healthcare Suppliers Not Registered for VAT?
In the healthcare world, many people work as sole traders or run very small limited companies. If their annual income from taxable services hasn’t hit that £90,000 mark over a rolling 12-month period, they aren’t required to register with HMRC.
However, there is a specific twist for the healthcare sector. A lot of healthcare services are actually “exempt” from VAT. Therefore, this income is excluded from your ‘taxable turnover’ and does not count toward the £90,000 mandatory registration limit.
Because of this, you’ll find many highly skilled professionals in the UK who are not registered for VAT simply because their work falls under these exemption rules or they haven’t reached the turnover limit.
Check Out: VAT Rules Healthcare Providers Need To Know
What Should You Do Before Paying Someone Who Is Not Registered for VAT?
Before you send over any money, there are a few things you should check to keep your clinic safe from an HMRC audit.
- Ask for a proper invoice: A bank transfer with no paper trail won’t cut it.
- Check the VAT status: Look at the invoice to see if any VAT has been added. If it has, ask for their VAT number. If they are not registered for VAT, ensure the invoice is not titled ‘VAT Invoice’ and does not include a VAT registration number or any VAT charges.
- Verify the number: If they do provide a VAT number, you can quickly verify it on the GOV.UK website.
- Look at the service: In healthcare, the tax treatment depends on what is being supplied, not just who is supplying it. Is it actual medical care, or is it something else?
- Think about your own recovery: If your practice makes both taxable and exempt income (partial exemption), remember that your own VAT recovery might be affected anyway.
Why Medical Registration Matters More Than VAT Registration?
Healthcare firms often get confused between being “VAT exempt” and not being registered for VAT. Even if a doctor or nurse earns £200,000 a year, they are not required to register for VAT if that income comes entirely from exempt medical care.
Only ‘taxable’ income, such as from medico-legal reports or purely cosmetic work, counts toward the £90,000 registration threshold.
HMRC looks at two things:
- Is the person a registered health professional (such as with the GMC, NMC, or HCPC)?
- Is the primary purpose of the work to protect, maintain, or restore the health of a patient?
If the answer to both is yes, the service is exempt. If you are paying a consultant for something like “expert witness” work or purely cosmetic treatments, the rules change.
How Does This Impact Your Invoicing?
If you’re paying someone who is not registered for VAT, the invoices you receive will not show any VAT. This can make your accounting a little easier, but it also means you need to be extra careful with your record-keeping to avoid errors in your tax filings.
If your business is VAT-registered, you cannot reclaim any tax on these invoices. However, you must still include the total in your accounting records (not as input VAT).
This may sound simple, but separating them from your VATable purchases is an important step in keeping your accounting accurate.
What Should an Invoice Look Like from Someone Not Registered for VAT?
When you pay a freelancer or a contractor who is not registered for VAT, their invoice needs to be clear to satisfy an HMRC auditor. It shouldn’t just be a scrap of paper. It needs to include:
- Their name and business address.
- A clear description of the medical services provided.
- The date the work was done.
Without a valid VAT number and a specific VAT charge on the invoice, there is no tax for you to reclaim, even if your clinic is VAT-registered. This is a common mistake we see where clinic managers try to “calculate” the VAT element on a gross payment. If they aren’t registered, there is no VAT element.
What Happens if a Supplier Should Be Registered but Isn’t?
As the customer, the burden of registration is on the supplier, not you. If you pay someone who is not registered for VAT, you aren’t responsible for checking their books to see if they’ve gone over the £90,000 limit. That is an issue between them and HMRC.
Your only job is to ensure you aren’t paying VAT to someone who doesn’t have a valid VAT number. If you see a VAT charge on an invoice but no VAT number, you should ask them to correct it immediately.
Not Registered for VAT Is Not the Same as VAT Exempt
It is easy to mix these two up, but they mean very different things for your healthcare practice. When someone is not registered for VAT, they are simply not on HMRC’s VAT register. That is usually because their taxable turnover is below the VAT registration threshold or they have chosen not to register voluntarily. They cannot charge VAT. They do not have a VAT number. And there is no VAT for you to reclaim on their invoices.
VAT exemption is about the type of service, not the size of the business. Certain healthcare services are classed as VAT exempt, even when provided by a fully VAT-registered business. In that case, the business is registered for VAT, has a VAT number, and it charges VAT on any standard-rated work. But it does not charge VAT on its exempt healthcare services.
For you as a healthcare provider, this matters because:
- “Not registered for VAT” means there is never any VAT to reclaim from that supplier.
- “VAT exempt” means the supplier may still be VAT registered, and you need to look at each invoice line to see what is exempt and what (if anything) is standard-rated.
When Should You Be Concerned About Paying Someone Not Registered for VAT?
Even though paying someone who is not registered for VAT may seem straightforward, there are a few instances where it could raise red flags:
1. Large Businesses Not Registering for VAT
If a supplier’s taxable turnover clearly exceeds the £90,000 threshold but they are not VAT-registered, you might want to double-check why. They might be under-reporting their income, or they could be intentionally avoiding VAT registration.
In these cases, it might be worth seeking professional advice to ensure everything is above board.
2. Mixed VAT Exempt and VAT-Paying Services
Some healthcare services are VAT-exempt, like many clinical services provided by doctors, dentists, and hospitals. However, other services, such as purely cosmetic treatments or medico-legal reports, are usually subject to VAT.
If you’re working with a non-VAT-registered business offering a mix of both services, make sure you know what’s exempt and what’s not.
How Paying Unregistered Suppliers Affects Your Partial Exemption Status?
Most healthcare businesses in the UK are “partially exempt.” This means you sell some things that have VAT (like supplements or certain reports) and some things that don’t (like GP consultations).
If you pay a trainer or a business coach who is not registered for VAT, it actually makes your partial exemption calculation a bit easier. Since there is no VAT on the expense, you don’t have to worry about “apportioning” that specific cost between your taxable and exempt income.
The Risk of Hiring Staff Through an Agency vs Direct Locums
If you hire a locum directly and they are not registered for VAT, you pay the flat fee. But if you go through a staffing agency, they may charge VAT depending on the structure and applicable concessions, and sometimes on the whole fee. Unless they meet the “Nursing Agency Concession” criteria.
Always check if you are paying the individual or an intermediary. If you use an agency, they must usually charge VAT on the full invoice amount, unless they qualify for specific exemptions like the Nursing Agency Concession.
Dealing with Overseas Healthcare Consultants
With the rise of telehealth, you might pay a specialist based abroad. If they are providing medical care (diagnosis or treatment) and are a registered professional, their service is generally VAT-exempt, just as it would be if they were in the UK. In this case, no VAT is usually due, but the treatment depends on the exact nature of the service.
However, if the specialist provides taxable services, such as medico-legal reports, expert witness work, or purely cosmetic consultations, the reverse charge rule applies. This means you must account for the 20% VAT on your own VAT return as if you had supplied the service to yourself. It sounds complicated. However, it is an important step to keep your healthcare accounting compliant.
Can I Get in Trouble if My Supplier Should Be VAT Registered but Isn’t?
Generally, no. The responsibility to register for VAT lies with the person or business providing the service. However, if HMRC decides they should have been registered, they will go after them for the back-dated tax, not you. Your main job is to ensure the invoice you paid is legitimate.
Do I Need to Keep Different Records for Someone Not Registered for VAT?
No, you do not need different record-keeping for someone not registered for VAT. You must keep standard business records (invoices, receipts, bank statements) for all purchases for at least 6 years. The main difference is that the supplier cannot charge you VAT. Hence, there is no tax for you to reclaim.
When recording these in your software, ensure the total amount is included in your ‘Total Purchases’ section. You must ensure the VAT amount is set to £0 so that no tax is reclaimed by mistake. However, you must still report the purchase value itself.
What if They Suddenly Register for VAT Mid-Contract?
If your therapist or locum goes over the threshold and registers, they must tell you immediately. From that date, they will start adding 20% to their invoices. You’ll need their new VAT number to record the payments correctly.
Is There a Limit to How Much I Can Pay Someone Who Is Not Registered?
There is no limit on what you can pay them, but there is a limit on how much they can earn before they must register. If you are paying one person £100,000 a year for non-exempt services, they likely need to be registered.
The Bottom Line
If you are paying someone who is not registered for VAT, the usual rule is simple. No VAT should be charged, and no VAT can be reclaimed.
The tricky part in healthcare is that registration status is only one piece of the puzzle. You also need to look at whether the service itself is taxable, exempt, or part of a more complicated healthcare VAT position.
Always keep accurate records, and if you have any doubts, it’s a good idea to consult with a professional to ensure your tax filings are correct.
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If you need help with any accounting service, such as bookkeeping for healthcare, payroll for healthcare, year-end accounts for healthcare, or NHS Pension schemes, reach out to us today. We’d love to discuss how we can make your life easier and your practice more profitable!
Disclaimer: All the information provided on “Paying Someone Who is Not Registered for VAT: A Healthcare Guide” including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.
