Readers’ forum: Are fees charged a sales lead or medical service?

One of my clients trades as a top-ranked psychologist and her fees are exempt from VAT so she has never registered for VAT. However she changed her business model last year and I wonder whether she has created a potential VAT problem.

The basic situation is that she now refers any new work to a team of five self-employed psychologists and for these referrals the psychologists increase their usual fees by £60 an hour and give this amount to my client for the referral as a pseudo commission.

My client says this fee is also exempt from VAT because she always gives the chosen psychologist a basic analysis of the client’s problems and a potential treatment solution when she passes on new clients ie there is a direct link to a medical service. But after this initial analysis my client does...