The Treasury has announced a zero-rate of VAT will apply to sales of PPE for Covid-19 from 1 May 2020 until 31 July 2020, in a move it says will save care homes and businesses more than £100m.
The UK Government said it has acted as soon as possible to bring the measure into force. EU law governing VAT, which the UK is bound to follow during the current transitional period, requires the UK to charge VAT on the equipment.
The UK Government is acting under an exceptional basis allowed by EU rules during health emergencies. The European Commission recently indicated support for member states to introduce temporary VAT reliefs to mitigate the impacts of the Covid-19 pandemic.
The Treasury says the cut in VAT will particularly benefit care providers, who are often unable to reclaim the 20% VAT they incur on their purchases.
The zero-rating should be automatically applied by suppliers, however, if you have purchased or will purchase PPE during the period 1/5/2020 to 31/7/2020, you should check your invoices to ensure that the PPE has been zero-rated.
If a supplier erroneously charges VAT on the PPE you have purchased, you should get in touch with them to make them aware that the VAT should have been zero-rated.
For those regularly purchasing large quantities of PPE on an ongoing basis e.g. care homes, charities, dental surgeries, it may be worthwhile considering the timing of your PPE purchases e.g. could it be beneficial for a purchase to be made pre 1/8/2020?
Video: VAT rates explained: standard, reduced rate and zero-rate >watch now
We have summarised the various announcements that have been made by the UK and Scottish Governments to support businesses, employers, employees and the self-employed during this period of disruption.
- Coronavirus Job Retention Scheme: (1) March to July 2020 and (2) August to October 2020
- Support for the Self-Employed
- Deferring VAT and Income Tax payments
- Support for businesses paying sick pay to employees
- Funding support - loans (CBILS, BBLS) and The Future Fund
- Support for business paying tax: time to pay service
- Scottish Government support: grants for businesses, self-employed and business rates relief
- Third Sector Resilience Fund and Wellbeing Fund
Covid-19 support available to businesses, individuals and third sector organisations facing the impact of the pandemic and the lockdown restrictions >read more