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What a relief! VAT advice for members selling to disabled consumers

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For those involved in the sale of mobility, healthcare and assistive technology products and services, VAT relief eligibility is an area that can cause some confusion. And, when applied incorrectly, it can result in businesses unwittingly finding themselves in hot water with HM Revenues and Customs (HMRC).

To help provide clarity on the subject, the British Healthcare Trades Association (BHTA) has created this useful guide to help our members understand the rules.

Relief, not exempt

There are a number of myths around this topic, so let’s start by dispelling one: It’s not VAT exemption! When you sell a product to a customer without charging VAT, you are providing “VAT relief for disabled persons” – an action also known as zero-rating because what you are doing is applying 0 per cent VAT.

You can only do this when the product is for someone who is disabled or has a long-term condition, and it is for his or her own personal use.

The product also has to be eligible, as it has to be “designed solely for use by disabled persons”.  You must never assume that everything you sell qualifies.
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The zero-rating process

Companies selling zero-rated products do not have to inform HMRC but your customer must make a declaration which you keep with your VAT records.  HMRC will look at the declarations if they carry out an inspection.

Importantly, the retailer does not have to provide proof of an individual’s disability, but you must have the customers’ declaration, which requires them to state what their disability or long-term condition is.

You can use this declaration form from the government to show your customer is a disabled person getting goods or services for their personal or domestic use, and will claim relief from VAT.
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Not for the short term

It is important to remember that if you are selling a product for short-term use, then this must not be sold without VAT. For example, someone might buy a manual wheelchair because they cannot cope with crutches whilst they are recovering from a broken leg but it is a short-term problem so they must pay the full VAT.
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GDPR implications

When a customer provides you with their declaration, collecting information about that individual’s illness or disability, then you should take steps to ensure that data is stored, handled and managed correctly.

BHTA recommends that you should state in your privacy policy that you have to keep VAT relief declarations for at least six years to meet legal requirements, before taking further actions to delete or anonymise the data.

Remember, the ICO highlights that you must not keep personal data for longer than you need it, and you need to think about – and be able to justify – how long you keep personal data. This will depend on your purposes for holding the data.
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Advertising prices

When it comes to displaying product pricing relating to zero-rated VAT products, it is important that both prices are clearly shown and identified. This is because not all of your customers may qualify for VAT exemption, and must know what the total price is before they reach the till or check out.

Under our Code of Practice, being clear and transparent regarding pricing is one of the core requirements that you must uphold.
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Common misconceptions

There are some instances when assistive technologies are sold as zero-rated, which are not. The important element to remember is that the item must have been solely designed for use by someone with a disability or long-term condition, or must be designed solely for use in or with such an item.

For example, the batteries used for most mobility products can be used for other purposes as well. They do not meet the “designed solely” stipulation so if you are simply selling someone a battery, you should always charge full VAT.

Anything designed for use by both disabled and able-bodied people will not be eligible and this means it is not always obvious whether some of the aids for daily living are eligible.

A can opener, for example, which is actually useful for anyone lacking in hand strength, is unlikely to qualify. However, cutlery designed and shaped in a way which makes it unlikely an able-bodied person would use it will probably be eligible.

You can gain invaluable insight regarding which products qualify to be zero-rated on the government’s ‘Reliefs from VAT for disabled and older people (VAT Notice 701/7)‘ guidance.
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Understanding eligibility

Certain assistive technologies are always eligible, such as wheelchairs and class 2 pavement scooters. Also, so are items like rollators, however, all are dependent on the need of the person buying the product having a disability or long-term condition.

Riser-recliner chairs with a lift and tilt function are eligible but recliner chairs without that function are not.

There are also some potentially grey areas that you are required to navigate as well. Revisiting the example mentioned above regarding the need to charge VAT to a disabled person if you are simply supplying a battery, then there are circumstances where zero-rating this may be appropriate – such as if the battery is supplied as part of a wider service of repair and maintenance. You would, however, need to ensure your records show that it was supplied in that context or HMRC would expect to see full VAT applied.

Class 3 mobility scooters are normally intended or adapted for use on the road (tipping them into primarily being regarded as a type of vehicle), so in that context, they do not qualify for the purpose of VAT relief.  However, you can zero-rate a class 3 mobility scooter that is designed solely for use by disabled persons. Only the manufacturer can confirm the design intent.

To gain a better understanding of the procedural guidelines and conditions that HMRC applies when deciding on VAT relief for disabled people, see ‘HMRC internal manual: VAT Relief for Disabled People Manual.’
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Reduced VAT rates for those over 60

While zero-rating relates to products created for disabled consumers, people over the age of 60 are eligible to pay a reduced rate of VAT (5%) on certain aids when they are bought and installed into their homes.

Eligible products for reduced VAT rates for older people include grab rails, ramps, stairlifts, bath lifts, built-in shower seats or showers containing built-in shower seats, as well as walk-in baths with sealable doors.

Importantly, your customer does not have to order and pay for the product themselves – it could be a friend, local council, charity or housing association placing the order on their behalf.

However, they would not qualify for the reduced rate if it is to repair or replace the goods after they’ve been installed. Also, the product purchased must be installed – your customer would not qualify for a reduced rate by just buying the aid. Also, the product has to be for a private home – it would not qualify for a residential home, for example.

You’ll need to have your customer confirm in writing that they meet these conditions, and it may be worthwhile creating your own declaration form that your customers can sign.

The declaration that you would require your customer to sign and date is simple, and should use this standard wording: I [full name] of [the address where the installation is taking place] declare that I am aged 60 or over and that this supply and installation qualifies for the reduced rate of VAT in accordance with The Value Added Tax (Reduced Rate) Order 2007.

You can learn more about reduced VAT rates for older people at the government’s ‘Tax on shopping and services‘ guide.
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Consequences of zero-rating ineligible products

If HMRC carries out an inspection and decides you have incorrectly zero-rated, they will issue you with a demand for the VAT and they can go back a number of years. Importantly, this can add up to a lot of time and money.
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How to verify eligibility

If unsure regarding eligibility, you should always ask the manufacturer whether the product qualifies for zero-rating: Has it been designed solely for use by disabled persons? HMRC will expect you to be able to show them evidence to support your decision.

To discover the procedural conditions that HMRC works to when deciding on VAT relief for products and services for disabled people, read ‘HMRC internal manual: VAT Relief for Disabled People Manual.’

The mantra should always be: if in any doubt, it is always safer to charge the full VAT.
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The guidance was last updated: 31st May 2022