Veterinary Services

1. Introduction

Services of a kind supplied in the course of their profession by veterinary surgeons are liable to VAT at the reduced rate. Such services need not necessarily be provided by veterinary surgeons. This leaflet sets out the general implications of applying VAT to these services.

2. General

2.1 A person who supplies taxable services in the course or furtherance of business in excess of specified limits (€37,500) in any continuous period of twelve months is an accountable person and is required to register for VAT.

2.2 An accountable person is liable to pay VAT at the appropriate rate on taxable goods and services supplied by him/her. An accountable person calculates VAT liability on a two-monthly basis by calculating the total tax due on sales of goods or services for the period and subtracting the deductible tax invoiced during the period - the difference is the amount of liability.

3. Which suppliers of veterinary services must register for VAT?

3.1 All veterinary surgeons and other persons supplying veterinary services (veterinary professionals) working independently are obliged to register for VAT if their annual turnover exceeds or is likely to exceed the specified limits (as above). Veterinary surgeons who are members of partnerships, or who operate as members of veterinary practices, are not regarded as independent persons for VAT purposes. In these circumstances, the combined receipts of all persons contributing to the partnership or practice are aggregated and are subject to the registration thresholds.

3.2 Applications for registration are made using Form TR1, which is available on the Revenue website under Business & Self Assessment/Popular Forms.

4. Veterinary Professionals Carrying on Farming or Other Businesses

A veterinary professional who is registered, or is obliged to register, because of the supply of veterinary services, and who is also engaged in other business activities, for example, farming or racehorse training, is liable to VAT on all his/her activities. As a general rule, a farmer is not obliged to register although he/she may opt to do so. However, when taxable activities, other than racehorse training, are carried on in addition to the farming activities, the turnover from all of the activities including farming are taxable. Therefore, a farmer supplying veterinary services is liable to VAT on receipts both from veterinary services and farming activities.

5. Obligations of VAT Registered Persons

VAT registered persons are obliged to:

• keep records which are sufficiently detailed to enable their liability as declared by themselves to be confirmed;
• issue invoices containing specified particulars in respect of taxable supplies to other accountable persons.
• submit a return on the prescribed form every two months of their supplies and taxable purchases together with a remittance of tax due

6. Accounting for VAT

The normal basis of accounting for VAT is the invoice or sales basis. However, veterinary professionals may, subject to conditions. Please see: Moneys Received Basis of Accounting for Tax.

7. Invoice Basis

A VAT registered veterinary professional using the invoice or sales basis of accounting will be liable to pay VAT by reference to his/her supplies as follows:-

• in the case of transactions with persons who are not registered for VAT s/he is liable at the rate in force at the time of supply;
• in the case of transactions with other VAT registered persons he/she is obliged to issue invoices and is liable to VAT at the rate of tax in force at the time he/she issues or ought to issue an invoice.

8. Moneys Received Basis of Accounting for Tax

8.1 Certain registered persons, as follows, may use the moneys received basis of accounting instead of the usual sales basis:

• persons engaged in the supply of taxable services where the turnover does not exceed €1,000,000, and
• persons selling goods almost exclusively (at least 90% to unregistered persons).

8.2 Transactions between connected persons, and property transactions, are excluded from the moneys received basis of accounting.

8.3 This facility is available to veterinary surgeons but they must specify this on Form TR1 when applying for VAT registration.

9. Withholding Tax

Income Tax withheld from payments to a veterinary professional which cover taxable supplies is deemed for VAT purposes to have been received by the veterinary professional. If, for example, in the case of taxable supplies, payment of an amount due to a veterinary professional is reduced from €1135.00 (€1000 + €135.00 VAT) to €935.00 (€200 withheld for Income Tax) the veterinary professional is, for VAT purposes, deemed to have received €1135.00 (€1000 + €135.00) and is liable for the VAT element therein. Please see the example below.

Example

Veterinary fees = €1000.00

VAT at 13.5% = €135.00

Calculation of withholding tax

VAT exclusive sum = €1000.00

Withholding tax at 20% = €200.00

Net = €800.00

VAT on the €1000 fees 13.5% = €135.00

Total receivable by veterinary professional = €935.00

Amount payable to Collector-General by the veterinary professional in respect of VAT = €135.00

10. Deduction for VAT Charged on Purchases

10.1 A VAT registered veterinary professional is entitled to take a credit or deduction (i.e. set off against VAT liability) for most VAT properly invoiced on supplies.

10.2 However, a credit or deduction may not be taken on expenditure on the following:

• the provision of food, drink, or other personal services for the person, his agents or employees (for example, hotel costs);
• accommodation other than accommodation in connection with a qualifying conference as defined in legislation
• entertainment expenses;
• purchase or hire of cars or other road passenger vehicles;
• purchase of petrol;
• an exempt or non-business activity, and
• VAT borne prior to registration.

10.3 Where a person carries on both taxable activities and other activities (for example, inspection of meat in factories as a State employee) only the expenses appropriate to his/her taxable activities qualify as deductible.

11. Rates of VAT

The following are examples of the rates of VAT applicable to supplies made by veterinary professionals. The list is not exhaustive.

12. Supply of Goods in Addition to Supply of Services

Veterinary professionals who supply medicines or other products as part of the veterinary service are liable to VAT at the reduced rate, subject to the two-thirds rule (please see paragraph 13 below). This is so even if the goods are, separately, liable at the standard rate or zero. On the other hand, if goods are left by the veterinary professionals to be administered by the client and separate charges are made and recorded for the separate supplies, this is regarded as a separate supply of goods, taxable at the rate applicable to the goods as appropriate.

13. The Two-Thirds Rule

The rate of tax applying to all services, including veterinary services, is determined by the ‘two-thirds rule’. This provides that a transaction is liable to VAT as a sale of goods at the appropriate rate and not as a service if the value of the goods (that is, their cost, excluding VAT, to the supplier) administered in providing the service exceeds two-thirds of the total charge to the customer.

Example 1: Two-thirds Rule

Total charge to client = €100

Cost of non oral medicines administered = €70: (this exceeds 2/3rds of €100)

Veterinary services are liable on this transaction at the standard rate (rate for non-oral medicines).

Example 2: Two-thirds Rule

Total charge to client = €200

Cost of oral medicines administered = €150: (this exceeds 2/3rds of €200)

Veterinary services are liable on this transaction at 0% (rate for oral medicines).

14. Place of supply of veterinary services

Place of Supply rules up to 31 December 2009

Up to 31 December 2009 as a general rule the place of supply of veterinary services was the place where the person supplying the services had established his business.

Place of Supply rules from 1 January 2010

S.I. No. 520 of 2009 amending the VAT Act 1972 gave effect to significant new EU VAT legislation on the place of supply of services which came into operation on 1 January 2010.

As will be the case with most services supplies of veterinary services made in Ireland and received by taxable persons in other Member States of the EU are, with effect from 1 January 2010 taxable where those persons have established their business. Similarly services received in Ireland by taxable persons are taxable here.

Where taxable supplies are made to a taxable person within the EU there is now a requirement for the supplier in Ireland to report the details by completing a return for the VIES (VAT Information Exchange System).

Where supplies are made to taxable persons established outside the EU no Irish VAT liability arises and there is no requirement to report the transaction on the VIES.

The new rules are explained in detail in the Information Leaflet Place of Supply of Services.

15. Further information

Enquiries regarding any issue contained in this Information Leaflet should be addressed to the Revenue District responsible for the taxpayer’s affairs. Contact details for all Revenue Districts.

VAT Interpretation Branch,

Indirect Taxes Division,

Stamping Building,

Dublin Castle.

June 2010