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VAT - pilots discriminated against by HMRC

Old 10th Jun 2008, 09:00
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VAT - pilots discriminated against by HMRC

Gentlemen

I know there is a “Medical” forum on PPrune, and it is obviously where I am most active, but I’d like some wider opinions on this topic, which seems to me to involve blatant discrimination by HMRC against pilots of all sorts, commercial and private.

As I am sure you all know, pilot medical examinations have been made subject to VAT in recent months. HMRC’s logic and reasoning for this is that you do not come to see someone like me primarily to improve your health or well-being. It’s not the same as going to a GP or hospital clinic with a problem or symptom, and asking for advice or treatment. It’s a commercial transaction, and therefore taxable.

As well as being an AME authorised by the CAA to carry out class 1 and 2 pilot medical examinations and issue JAR medical certificates, I also hold a similar position regarding seafarer medical exams. The medicals required by seafarers are regulated by the MCA (Marine and Coastguard Agency), and are less frequent and less thorough than those required by any pilots.

Since becoming VAT registered I have treated all these certification medicals equally and have (albeit reluctantly ! ) added 17.5% to medical fees across the board.

Yesterday, however, I received an e-mail from the MCA drawing my attention to advice on VAT on medicals as published by HMRC. You can see the page to which I am referring here :

http://www.hmrc.gov.uk/manuals/vatmanual/vathealth/VATHLT2130.htm

It’s quite clear, under “pilots, application for licence, fitness to fly, etc” that all medicals are chargeable at Standard Rate (SR). But look just above that entry and you’ll see “medical examinations – see PN 701/57 . . . . . .”. Under that heading is the bit which leaves me aghast :
  • Seafarers - to ensure someone working off-shore does not go to sea with a medical condition which is likely to deteriorate
Gentlemen - I see at least part of the reason for your all having to have class 1 JAR examinations annually to be to ensure that we try to pick up any condition which might be likely to deteriorate if you work at 35000 feet for ten hours on the way to Singapore or Hong Kong !

Any comments ? Does BALPA regard this as discrimination against pilots ?
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Old 10th Jun 2008, 10:26
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AMEandPPL

I am afraid this does not surprise me. All through my initial training I tried to get some kind of tax rebate. They were never interested, even though I was a taxpayer funding my own training thus paying double tax.

I fear a pilots job will always be looked upon as a hobby compared to other professions.

Thanks for pointing this out.
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Old 10th Jun 2008, 12:37
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Thanks for pointing this out. Time to see if BALPA can get involved! I suspect they think because many pilots get recompensed for this by their employer they regard it as OK to turn the screw a little harder.
How will history remember Brown and his attitudes?
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Old 10th Jun 2008, 12:39
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VAT

In my opinion would BALPA get involved I don’t think so.

My reasons would be which pilots are actually affected by this.

Pilot A who is employed by an airline. Most airlines pay for the Class 1 so the pilot is not out of pocket. The airline would be VAT registered so they can reclaim the VAT.

Pilot B who is a freelance pilot and VAT registered. This pilot will just claim the VAT back on their VAT Return.

That just leaves the following pilots : -

- Student Pilot
- Unemployed Pilot
- Freelance Pilot who is not VAT registered.

The Freelance Pilot can become VAT Registered so he does not pay VAT on his medical.

So with VAT getting charged on medicals the pilots that suffer are the Student Pilot and the unemployed pilot.

Would BALPA get involved for these types of pilots I don’t think so, which sucks really because they are the ones who are trying to save the pennies.
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Old 13th Jun 2008, 20:13
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Well said its a disgrace student pilots are not given the same tax status as uni students,apprentices. If someone studies all the way to ATPL they should be given a tax rebate at the end of it! Otherwise its just double taxation.
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Old 13th Jun 2008, 21:50
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As a flying instructor can't see why i can't claim medical and renewal expenses. After all if i don't renew, i become an unemployed statistic claiming dole money.
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Old 13th Jun 2008, 22:03
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Tax

You still get income tax relief on the renewal of your Class 1 but you will not be able to reclaim the VAT back unless you are VAT registered.
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Old 13th Jun 2008, 22:05
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Playing the devils advocate;

1) If the AME isn't VAT registered the customer doesn't pay VAT, (if it's a sideline to your main medical activities, which it is to quite a few AMEs you'd have to work very hard to reach the VAT threshold each tax year).

2) If the AME is VAT registered, he can claim the VAT back.

3) It's a commercial service provided by a professional service provider, as with any other service provider, if the turnover meets the threshold, why shouldn't the appropriate VAT be applied.

4) Professional fees and such expenses can be offset against income tax, check with an accountant, the IR or when you fill in your tax return.
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Old 13th Jun 2008, 22:44
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Red face missing the point . . . . . . .

You all seem to be missing the main point I was making ! No-one is disputing (well, not much, anyway !) that it's a commercial activity first and foremost, and that VAT is therefore reasonable to charge on the service.

I simply cannot understand, however, why medicals for professionals in one transport industry are liable to VAT, when medicals for professionals in a different transport industry are not.

I'll ask again, are pilots being discriminated against by HMRC ?
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Old 13th Jun 2008, 23:58
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are pilots being discriminated against by HMRC ?
Yes, but I suspect HMRC are likely to try and tax the Seafarers if this became an issue, rather than lose income on us.

Interesting point though, and one that most of us were probably unaware of.
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Old 14th Jun 2008, 11:25
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Red face creating divisions . . . . . . . .

1) If the AME isn't VAT registered the customer doesn't pay VAT (if it's a sideline to your main medical activities, which it is to quite a few AME's you'd have to work very hard to reach the VAT threshold each tax year).

2) If the AME is VAT registered, he can claim the VAT back.
This is another, albeit slightly different, aspect of this whole thing which also worries me greatly. Depending on their levels of activity different AME's will charge VAT, and others won't. If pilots shop around for the cheapest rates (how many of you do ? ) then loyalties to the smaller, non VAT registered, practices might increase, to the eventual disadvantage of the larger VAT registered practices. How fair is that ?
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Old 14th Jun 2008, 15:51
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VAT

I think this largely depends on who your cliental is.

Broadly, the pilots who shop around will be ones who have to self finance their medicals i.e students, private pilots etc

For employed commercial pilots their medicals are usually paid by the company so they will just reclaim the VAT no big deal as such.

If a majority of your clients fall into the first bracket then it would have an effect. If your clients fall into the second bracket, then I don’t think it will have too much of an effect.

Who knows whether HMRC will charge VAT on seafarers medicals and if they do how much money will it generate, I personally think not a lot.
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Old 14th Jun 2008, 19:05
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ex-seafarer: John Prescott
ex-pilot: Norman Tebbitt

That's why pilots attract VAT.
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Old 14th Jun 2008, 19:37
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Healthcare is VAT exempt. However when we go for our medical we are not there with healthcare as the primary motive. We are there for certification - that is why it attracts VAT.

Unfair to many. If you're freelance (and not VAT regisitered like many instructors) then it's tax deductable but you won't see the VAT again.
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Old 22nd Jun 2008, 10:08
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Red face definition needed . . . . . . . . . . . .

However when we go for our medical we are not there with healthcare as the primary motive. We are there for certification
That's certainly true, in principle. But there are areas that I regard as a bit grey here. In my experience it's actually quite unusual for a whole medical (eg a Class 1 ) to be carried out here without some sort of health promotion or health advice being asked for, given or discussed.

How many class 1 pilots would admit to asking their AME about a minor matter, a trivial symptom, an inocuous "spot" of some sort, or such like ? Can't be bothered to make a separate appointment; don't like to trouble the GP with something so small; much less time pressure when the AME has one hour for the medical, instead of the GP's four minutes !

The visit to the AME may well have certification as its "primary" motive, but can VAT liability of the overall fee be apportioned if health advice is given as well as the class 1 certificate ?
Is there anyone out there with accountancy or taxation expertise who could advise on this ? Just as importantly, is there anyone out there who cares ?
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Old 23rd Jun 2008, 15:09
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Typical of HMRC - staffed as they are by those who are not a success in the accountancy / tax profession, they victimise and target any individuals perceived to be successful or seen to be using legal loopholes to their advantage.

I wouldn't assume they know what they are doing, nor that they know they are discriminating between marine and aviation. Someone in HMRC has seen a stream of revenue from pilots that is untaxed, and used the "unfair" argument to further their career.

I doubt that if anyone had the money and time to challenge them, that it would stand up in court at all.
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Old 23rd Jun 2008, 16:25
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ex-seafarer: John Prescott
ex-pilot: Norman Tebbitt


Norman Tebbit was a 707 Captain. John Prescott served drinks from behind a bar on a ship. That just about sums it up!
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Old 23rd Jun 2008, 22:24
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I always thought Tebbit never got beyond being a F/O in BOAC?
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Old 23rd Jun 2008, 23:28
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Red face challenge HMRC . . . . . . . . .

if anyone had the money and time to challenge them
Any volunteers . . . . . . . . ?
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