Medical Reliefs

The VAT relief for purchases for medical research etc. works by the supplier applying the zero rate of VAT to the items purchased, instead of the standard rate of VAT.  The relief not only applies to the purchase of qualifying goods but also to the lease or hire of such goods.

In order for the supplier to apply the zero rate of VAT we must issue a certificate to them claiming the relief – we should not issue a certificate if the conditions for zero-rating are not met.

Conditions for Zero-rating Relief

Zero-rating can be applied when we purchase equipment to be used mainly for medical or veterinary research, training, diagnosis, or treatment.  The equipment must be what HMRC consider to be:

• medical equipment;
• scientific equipment;
• computer equipment and certain software;
• video equipment;
• sterilising equipment;
• laboratory equipment; or
• refrigeration equipment.

Parts and accessories for use in or with any of the above equipment can also be zero-rated.

Note - If the goods do not fall within any of the categories above we cannot obtain zero-rating relief even if the goods are to be used in medical research etc.

Services do not, generally, qualify for zero-rating relief from VAT.  The relief mainly relates to goods.

2.1 Installation services

Installation services can sometimes be zero-rated when qualifying goods are installed.  If the normal selling price of the goods includes an amount for installation, fixing or connection to mains services and/or testing equipment on site, zero-rating applies to the whole selling price – including that element which relates to installation or testing.

However, where building works, such as removal of walls or reinforcing floors, are necessary in order to install large items of equipment, these works are subject to the standard rate of VAT, even when carried out by the supplier of the equipment.

2.2 Repair & maintenance services

The repair or maintenance of goods which were eligible for zero-rating and for which we have issued a certificate can be zero-rated.

Zero-rating also applies to any goods supplied in connection with a zero-rated supply of repair and maintenance.

Any items for which we claim zero-rating must be used mainly for medical (or veterinary) research, training, diagnosis, or treatment.  Where the equipment is to be used partly for a qualifying use, and partly for any other use, it can be zero-rated only where its main use is for medical research etc.  In this context ‘main’ means real, substantial and continuing.

The goods must fall within one of the categories listed in section 1 above– further detail is provided below:

• Equipment means articles designed or used for a specific purpose. It will usually be durable, although certain disposable items, such as syringes that are designed to be used once only, may still be equipment.

(Note – Please see the information regarding substances used directly for synthesis or testing in medical research as this is a separate relief with its own conditions).
The following items are not equipment and do not qualify for zero-rating, even when used in medical research etc.:

• bulk materials such as liquids, powders, sheets, pellets, granules;
• clothing (other than specialist medical equipment such as surgical masks, gowns and gloves);
• consumables such as chemical reagents, fuel, ink, medicines, oil, paper, and cleaning and sterilising fluids.

However, medicines and chemical reagents may qualify for zero-rating under a separate relief.

• Medical equipment has features or characteristics that identify it as having been designed for a medical (including dental) purpose or function, such as the diagnosis or treatment of patients.

This covers a wide range of goods, from simple items like bandages and tongue depressors, to complex machinery such as x-ray machines and scanners.

General use items used to equip a medical facility, such as a television purchased for use in a hospital ward, are not medical equipment

• Scientific equipment is designed to perform a scientific function. This includes precision measuring equipment and analytical equipment such as thermometers, weighing machines and spectrometers.

Equipment that is not designed to perform a scientific function, but merely works on a scientific principle, is not scientific equipment.

• Computer equipment includes computer hardware such as servers, screens, keyboards, and disks.

Machinery or other equipment that is either operated by computer or has computerised components, is not computer equipment.

Computer software & software licences can also be treated as ‘computer equipment’ but it must be used solely (not just mainly) for medical research etc.

Computer printer cartridges of ANY kind (e.g. laser, inkjet etc.) do NOT qualify.

• Video equipment includes video recording and playback equipment.
• Sterilising equipment includes autoclaves and other specialised equipment using steam or other high temperature processes.

Microwave ovens and other cooking appliances are not sterilising equipment, even if they can be used to sterilise. Sterilising fluid is not equipment, and does not qualify for zero-rating, even when used for medical research etc.

• Laboratory equipment is designed for use in a laboratory, such as:
  • test tubes and other laboratory glassware;
  • bunsen burners;
  • fume cupboards;
  • microtomes;
  • cryostats;
  • laboratory benches;
  • specialised sinks and catchpots.
  • specialist cages and bedding for lab animals *

The following are not laboratory equipment:  

• ordinary cupboards, lockers, seats and other furniture, even when these are used to equip a laboratory;
• bulk materials such as liquids, powders, sheets, pellets, granules;
• general purpose items used to equip a laboratory;
• consumables such as chemical reagents, medicines, and cleaning and sterilising fluids;
• animals (e.g. rats and mice)**.

* Food for lab animals can only be zero-rated if it is specialised diets formulated for lab animals and is not held out for sale as packaged/prepared pet food.

** Animals which are of a species which is normally used for human consumption may possibly be zero-rated e.g. rabbits, chickens, cows, certain fish etc.  If you are purchasing such animals and think you may be able to have the purchase of such animals zero-rated please consult the tax department as this is a different VAT relief altogether.

• Refrigeration equipment includes all cooling and freezing equipment, whether designed for industrial, domestic or any other purpose.

In Oracle, the VAT relief for Medical/Veterinary equipment etc. is generated by a combination of Purchasing Category and Intended Use (Med/Vet Research).

In order for the intended use to appear on a “Project” purchase order it is essential that the “Project” is set up with the correct Intended Use default.  If the equipment qualifies for relief, Oracle will then automatically display the appropriate zero-rating certificate on the Purchase Order.

The certificate will be sent to the supplier as part of the PO and you should keep a copy of the certificate/PO with the invoice.