Are you looking at purchasing an item and wondering if you are able to get it VAT exempt? Well, the answer is it depends on three main factors.
As a supplier of care homes and the elderly, we often get asked about the subject of VAT exemption. There are very strict rules around the use of VAT exemption for disabled persons and charities set out by the government that we have to adhere to.
The three criteria that you must meet in order to claim zero rating are:
- You, as the customer, must be eligible to purchase at zero rate.
- The goods are for the personal or domestic use of, you, the customer
- The goods and services are eligible to be supplied at the zero rate
What makes you, the customer, eligible?
There are two groups that we, as a supplier, are allowed to provide VAT exemption to. These are:
- Chronically sick or disabled people
Individuals do not need to register with the government or any other body in order to qualify, Charities must be registered as charities with the Charity Commission and have a charity number.
Disabled people are eligible for VAT exemption if they are chronically sick or disabled, it cannot just be a short-term disability such as a broken leg. See the extract below for the exact information from the government website.
3.2.1 What ‘chronically sick or disabled’ means
A person is ‘chronically sick or disabled if they are a person with a:
- physical or mental impairment which has a long-term and substantial adverse effect on their ability to carry out everyday activities
- a condition which the medical profession treats as a chronic sickness, such as diabetes
It does not include an elderly person who is not disabled or chronically sick or any person who’s only temporarily disabled or incapacitated, such as with a broken limb.
If a parent, spouse, or guardian acts on behalf of a ‘chronically sick or disabled’ person, your supply is treated as being made to that ‘chronically sick or disabled’ person.
Charities are eligible for VAT exemption on eligible products provided the goods and services they are purchasing are for a specific disabled person (or persons) for their personal or domestic use. The Charity must provide the supplier with an eligibility declaration or certificate to request what goods should be supplied VAT exempt. You can view example declarations available on the government website here.
3.3 Supplies to Charities
You cannot zero rate all of the goods and services listed in paragraph 2.4 to all charities. So you should take extra care in checking that a charity is eligible for VAT relief before zero-rating your supply.
Supplies of goods listed in paragraph 2.4 to charities will only qualify for VAT relief where the goods are made available by the charity to a disabled person for their personal or domestic use – see paragraph 3.4.
What is personal or domestic use?
The definition from the government website states:
‘Domestic or personal use’ means that the supply is needed specifically for the use of a disabled individual or series of disabled individuals.
So, this means that the product can only be VAT exempted if it is going to be for a specific person, or a set of specific people and in no circumstances applies to business or commercial use.
Personal or domestic use does not cover:
- Goods and services for business or commercial purposes.
- Items are placed in a communal area for the general use of a whole group of people. An example would be a wheelchair in a community hall.
- Goods and services intended for a resident of a hospital or care home; or for anyone attending a hospital or care home for treatment.
- Goods and services for any other person or commercial establishment, with the exception of a charity, where the goods are for use by, or in connection with, care provided to an inpatient or resident of a health institution or to a patient whilst attending the premises of a health institution where the items are intended for use in the care or treatment provided in the relevant hospital, nursing home or health institution.
Which goods and services are eligible for zero rating?
In order for a product or service to be eligible for VAT exemption, it must have been designed solely for the use of a disabled person.
The definition from the government website states:
A medical or surgical appliance is a device or piece of equipment that’s designed solely for the relief of a severe impairment or a severe injury.
You can zero rate the supply to an eligible customer (as explained in paragraph 3.1) of any other equipment and appliances that have been designed solely for use by disabled people.
So, this means that the goods and services that are supplied must be specifically designed for someone who is chronically sick or disabled. The easiest way to check this is to consider what the designers' original intention would have been. Was it to produce equipment or an appliance designed exclusively to meet the needs of persons with disabilities? If yes, then it is likely eligible for zero rating.
So, let's take a look at some examples of products that are eligible for VAT exemption:
- Incontinence Pads
- Electric Nursing Beds (provided it is clearly for the use of people with disabilities such as including cot sides and being height adjustable)
- Nursing Mattresses (provided they are designed solely for a disabled person)
- Patient Lifting Hoists, Standaids & Slings
And some examples that are not eligible for VAT exemption:
- Contact lenses
- Hearing aids
- Patient Wipes
- Overbed Tables (While these are predominantly used by disabled persons, they are not only useful to disabled persons, and are used by others)
So, are care homes eligible for VAT exemption?
Unless the care home is a charity, the unfortunate answer is no. It states very clearly on the government website that in no circumstances are we to zero rate goods that are supplied to a care home, even if they are for the use of a specific resident from within the care home, and to be paid for by that individual. The extract below makes this very clear.
The following are excluded from the term ‘domestic or personal use, and are not eligible for VAT relief:
- goods and services used for business purposes
- supplies of eligible goods made widely available for a whole group of people to use as they wish, for example, a stair lift installed in a charity building and made available for the general use or convenience of all those chronically sick or disabled persons who might need it, rather than for the personal use of specified individuals
- goods and services supplied to:
- an inpatient or resident of a hospital or nursing home
- any person attending the premises of a hospital or nursing home for care or treatment
- any other person or commercial establishment, with the exception of a charity, where the goods are for use by, or in connection with, care provided to an inpatient or resident of a health institution or to a patient whilst attending the premises of a health institution where the items are intended for use in the care or treatment provided in the relevant hospital, nursing home or health institution
So, in summary, if the product you wish to purchase is eligible for VAT exemption, is for personal and domestic use, and, you, the customer are eligible for VAT exemption we are able to remove the VAT from your order before you pay.
Any further inquiries will be addressed by contacting customer support.