GAMBICA is pleased to welcome updated guidance from HMRC issued on 6 October 2023, which provides much-needed clarification on the eligibility for VAT relief of qualifying medical, scientific, laboratory and other equipment or services purchased for medical or veterinary research.
Ben Sunderland, of GAMBICA’s VAT group, said: “The new VAT Notice 701/6 clarifies many ambiguities introduced by previous versions, in particular by amendments made in the list of examples of qualifying goods. GAMBICA, after consulting with charities and universities, proposed changes to the issue of the VAT Notice published in October 2018 which had introduced even more ‘grey areas’ for suppliers.”
After several meetings with the policy body of HMRC, a methodology was agreed to reduce the ambiguity introduced by the recent changes and to change the format of wording in the main body of the Notice within the definitions provided by the VAT Act 1994. Ben said: “The most important foundation of these discussions was to agree that suppliers can allow zero rating where possible to enhance the impact of charitable funds. This is important, as most research bodies are unable to reclaim VAT.”
Any eligible medical or veterinarian equipment used in research, diagnosis and treatment funded by charitable donations or by individual registered charities can be considered for zero rate VAT by the supplier of these goods. This is equivalent to a 20% cost saving for those eligible.
Louise Scattergood, also of the GAMBICA VAT Group, said: “The work done by GAMBICA members to facilitate these changes has been done with and on behalf of British universities, charities and hospitals across the UK purchasing medical and veterinary equipment. It will make research funds go considerably further simplifying decision making for both experts in research institutions and suppliers on applying zero rate VAT.”
Changes in the new VAT Notice
Some of the difficulties with the previous VAT Notice focused on Personal Protective Equipment (PPE). Such equipment can be essential to protect researchers as well as patients but the last edition of the VAT Notice disallowed dual use products labelled both as a medical device and as PPE, two different sets of regulations often used in a clinical and medical setting.
HMRC specifically declared Nitrile gloves, including medical equipment nitrile gloves, ineligible for zero rate VAT, whatever their use. Using examples of alternative materials used for medical and surgical gloves, the GAMBICA VAT Group was able to persuade HMRC that the material a glove is made from should not restrict its eligibility instead, eligibility should be guided by the purpose for which the equipment is used. If the gloves are used to protect a patient or sample from cross contamination, PPE must be considered a medical device which at the same time can also protect the user. The same argument on material was used to include lab plasticware under the Laboratory Glassware definition.
The new VAT Notice 701/6 makes it clear that gloves can be eligible for VAT relief if they are used in a ‘medical’ or ‘surgical’ capacity and that PPE can be eligible for zero rating where it is an accessory to the equipment or required for its safe use, for example, cryogenic gloves or medical or surgical masks. It is the supplier’s responsibility to provide the evidence, usually obtained from the manufacturer, to support the declaration claim within the prescribed definitions of the Notice 701/6.
The following items have been added to the list of examples, given in the VAT Notice, which are eligible to have zero rate VAT:
• Aprons, Cryogenic
• Batteries for eligible equipment (if bespoke)
• Biosafety cabinets
• Furnace, laboratory
• Gloves cryogenic
• Gloves, medical or surgical
• Gloves, nitrile medical or surgical
• Gowns, medical or surgical
• Laboratory glassware or plasticware
• Laboratory ovens
• Masks, medical or surgical
• Needles, suture
• Scanner, MRI, CAT
• Sinks, specialized laboratory
• Test tube racks
The new notice also clears up some confusion about the eligibility of laboratory ‘consumables.’ Consumables in the laboratory can mean items including pipette tips or reagents, rather than the common definitions which would include things like paper and ink which were ineligible. The new Notice makes explicit that reagents and substances including liquids, powders, sheets or pellets may be eligible for relief under VAT Notice 701/1.
Extra help from GAMBICA
GAMBICA has developed additional information which includes a help document, consensus position on items not specifically mentioned in the examples given in HMRC’s new VAT Notice 701/6 (the ‘Grey Items’ list) and a decision-making flow chart to help both suppliers and customers follow a clear process in deciding what can be zero-rated. GAMBICA is asking members to provide information on decisions made by HMRC inspectors as VAT audits are carried-out under the new guidance, to ensure there is consistency of application by different local VAT inspectors.
With the pace of technological change, new types of equipment or materials will often be developed and it may not be straightforward to determine if the item is a qualifying one. The list of examples provided by HMRC is not exhaustive and in areas of doubt, specialist advice will be needed. GAMBICA’s grey list will help, however each supplier must always decide for themselves as to the eligibility in every individual case.
For further information, contact [email protected].
To view the complete GAMBICA VAT zero rating guidance, click here.
For more details on the VAT decision hierarchy, click here.