Extracts from HMRC Notice 701/7 (August 2002)

VAT exemption customer eligibility extracts

3. Customer eligibility


3.1 Who can purchase zero-rated goods and services?

The zero-rating of goods and services for disabled people depends in part upon the status of the recipient - see paragraph 2.1. You can only zero rate supplies to:
handicapped people - see paragraph 3.2; 
charities - see paragraph 3.3; and 
certain eligible bodies - see paragraph 3.4.
As a supplier you must take reasonable steps to check that your customer is eligible to receive your goods or services at the zero rate.

3.2 Supplies to handicapped people

You can only zero rate supplies to handicapped people when:
the person is 'chronically sick or disabled' - see sub-paragraph 3.2.1, and 
the goods and services are purchased or acquired for their personal or domestic use - see paragraph 3.5.

3.2.1 What does 'chronically sick or disabled' mean?

A person is 'chronically sick or disabled' if he/she is a person:
with a physical or mental impairment which has a long-term and substantial adverse effect upon his/her ability to carry out everyday activities; 
with a condition which the medical profession treats as a chronic sickness, such as diabetes; or 
who is terminally ill.
It does not include a frail elderly person who is otherwise able-bodied or any person who is 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.

3.2.2 Terminology

The term 'disabled' is used throughout this notice and means 'handicapped' or 'disabled or chronically sick'.

3.3 Supplies to charities

You cannot zero rate all of the goods and services listed at paragraph 2.4 to all charities. You should, therefore, take extra care in checking that a charity is eligible for VAT relief before zero-rating your supply. 
Supplies of goods listed at paragraph 2.4 to charities will 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 3.5. 
There are certain other circumstances when supplies of goods listed at paragraph 2.4 will qualify for VAT relief - see Notice 701/1 Charities and Notice 701/6 Charity funded equipment for medical, veterinary etc uses.

3.3.1 What is a charity?

Bodies in England and Wales have charitable status when they are registered, excepted or exempted from registration with the Charity Commission, or bodies anywhere in the United Kingdom which are treated by the Inland Revenue as charitable. Not all non-profit making organisations are charities. 
There is no distinction for VAT purposes between those charities registered with the Charity Commission and those that are not required to register. However, unregistered charities claiming zero-rating may need to demonstrate that they have 'charitable status'. This may be achieved from their written constitution or by the recognition of their charitable status by the Inland Revenue. 
Further information on VAT reliefs available for charities is contained in Notice 701/1 Charities.

3.4 Supplies to eligible bodies

Supplies purchased by certain healthcare bodies and hospitals with charitable funds may qualify to be zero-rated under separate rules. For more information see VAT Notice 701/6 Charity funded equipment for medical, veterinary etc uses.

3.5 What does for 'domestic or personal' use mean?

'Domestic or personal' use means that the supply must be made available specifically for the use of an eligible individual (or series of eligible individuals). 
Excluded from the terms 'personal' or 'domestic', and not eligible for VAT relief are:
  • goods and services used for business purposes;
  • supplies made widely available for a whole group of people to use as they wish. For example, a stair lift in a charity building for the use or convenience of all chronically sick or disabled persons who might use the building would not qualify for relief. This is because the charity is making the lift available for the general use of all those people who might require it, rather than for the personal use of specified individuals;
  • goods and services supplied to:
    • an in patient or resident of a hospital or nursing home;
    • any person attending the premises of a hospital or nursing home for care or treatment; and
    • any other person or commercial establishment where the goods are for use by, or in connection with, either of the above, where the items are intended for use in the care or treatment provided in the hospital or nursing home. For more information see Notice 701/31 Health and Care institutions.

3.6 Can anyone pay for the eligible goods and services?

As a general rule, yes.
There are, however, special rules that apply to supplies of certain types of equipment paid for or arranged at the behest of the National Health Service, hospitals or certain other institutions that provide nursing or residential care. For further information on these rules please see Notice 701/31 Health and Care institutions.

3.8 What if a customer is unable to make a written declaration?

It may not always be possible for a disabled person to sign a declaration (for example, if the person is a child or unable to write). In such cases, the signature of a parent, guardian, doctor or another responsible person is acceptable on the declaration.

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