Expert Advice: How VAT could deliver a competitive advantage
How VAT could deliver a competitive advantage
When do you not have to charge VAT? If you are supplying to someone who is not VAT registered in the UK or not able to reclaim VAT in full, it makes a 20% difference. Suppliers often don’t want to get into trouble with HMRC so err on the side of caution by adopting an approach of “If in doubt charge it out”. This could make your product more expensive to customers and put you at a price disadvantage so it makes commercial sense to identify the UK sales where you legitimately may not have to charge VAT. There are a myriad of different reliefs and exemptions but some of the following might be relevant to MediWales members.
Selling to disabled individuals
The supply of certain aids, equipment and appliances is zero rated when sold to a disabled individual for their personal or domestic use.
Selling to charities
There are several possible areas of VAT reliefs when suppling to charities. These include
- sale of drugs
- aids & equipment to be made available to disabled or chronically sick persons where for personal or domestic use
- equipment for donation to the NHS
- substances for synthesis or testing
Selling to the NHS
Where the NHS procures certain qualifying equipment from charitable funds or voluntary contributions, the sale can be zero rated as can repair and maintenance of qualifying items. To qualify, the equipment has to be of a certain type and also put to a certain use as set out in the legislation.
However where the NHS procures goods or services from its own public funding (as opposed to charitable funds), generally VAT has to be charged and the question then for the NHS body is whether it can reclaim it. The NHS can reclaim VAT on certain “contracted out services” but not generally on goods. The rules are complex running to 75 different categories but suppliers to the NHS would be advised to understand the rules as they impact on their area of activity. If a supply can be made to fit one of the eligible headings, the offering is then in effect 20% cheaper for the NHS customer.
The VAT legislation is very detailed and it is beyond the scope of this article to provide a comprehensive analysis but Centurion VAT Specialists can help with any VAT queries.