VAT and Hair Transplants: Exempt Medical Care or Taxable Service?

A recent First-Tier Tribunal (FTT) ruling in Advanced Hair Technology Ltd v HMRC [2025] UKFTT 241 (TC) has clarified the VAT treatment of hair transplants for androgenetic alopecia (AGA). This case highlights the need for businesses in the aesthetic and medical treatment sector to carefully assess whether their services qualify for VAT exemption under Items 1 and 4, Group 7, Schedule 9 of the VAT Act 1994.

Are Hair Transplants Exempt from VAT?

The Tribunal ruled that hair transplants performed for AGA were primarily cosmetic and therefore subject to standard VAT at 20%. The key reason was that AGA is a common condition, affecting up to 80% of Caucasian men by age 70, making it part of the natural aging process rather than a medical disorder requiring treatment. However, the ruling emphasised that VAT exemptions must be assessed on a case-by-case basis. For instance, hair transplants following radiotherapy or trauma-related hair loss may still qualify as VAT-exempt medical care.

Penalties for Incorrect VAT Treatment

Failing to properly register for VAT or incorrectly applying exemptions can lead to significant financial consequences. In this case, HMRC assessed VAT liabilities of £2.49 million and imposed a civil penalty of £374,734 under Section 67 of the VAT Act 1994. Key penalty risks include:

• Failure to Register for VAT: Businesses exceeding the £90,000 VAT threshold must register. Late registration penalties range from 5% to 15% of unpaid VAT, depending on the delay.
• Retrospective VAT Assessments: HMRC can backdate VAT claims up to 20 years in cases of deliberate misstatements.
• Incorrect VAT Exemption Claims: Businesses that wrongly claim VAT exemption can be forced to repay VAT, plus interest and penalties.

Lessons for Businesses

Businesses offering hair transplants and other aesthetic treatments must:

• Assess VAT obligations carefully – VAT exemption is only available for procedures with a clear medical purpose.
• Maintain accurate records – Proper documentation is critical to support VAT exemption claims.
• Register on time – Avoid unnecessary penalties by monitoring turnover and ensuring compliance.

Get Expert VAT Advice

VAT rules in the medical and aesthetic sector can be complex, and mistakes can be costly. Lawrence Grant LLP has extensive experience in VAT advisory and compliance, helping businesses navigate HMRC regulations efficiently.

For tailored guidance, contact Alan Rajah, Partner at Lawrence Grant LLP, at:
alan@lawrencegrant.co.uk
+44 (0)20 8861 7575