The Value Added Tax (Drugs and Medicines) Order 2020 Tax Information Impact Note
Updated 13 March 2020
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Who is likely to be affected
Online prescription service companies, their UK patients and dispensing pharmacies.
General description of the measure
This measure amends the scope of the zero-rate for drugs dispensed on the prescription of an appropriate practitioner, by adding to the definition of appropriate practitioners:
- ‘EEA health professionals’, in relation to supplies before the end of the transition period,
- ‘Approved country health professionals’ in relation to supplies made on or after the end of the transition period.
Following the departure of the UK from the EU, the transition period ends at 11 pm on 31 December 2020.
Policy Objective
To align the UK VAT legislation with the Human Medicines Regulations 2012, which currently permit prescriptions written by ‘EEA health professionals’ to be dispensed by UK pharmacies, and will replace that category with ‘approved country health professionals’ at the end of the transition period. Approved country health professionals will be those included on a register published by the Department for Health and Social Care.
The objective is to allow the VAT zero rate to apply equally to these prescriptions as it does to private prescriptions written by other approved medical practitioners.
Background to the measure
The VAT zero rate for drugs and medicines issued in accordance with private prescriptions currently does not apply to prescriptions issued by health professionals registered in countries outside the UK.
Practitioners based in EEA countries are fully recognised by the Department of Health and Social Care in the Human Medicines Regulations 2012 and UK pharmacists are authorised to dispense prescriptions written by them.
This results in unfair treatment when compared to patients collecting drugs and medicines under private prescriptions written by all of the other Department of Health and Social Care approved medical practitioners.
Detailed proposal
Operative date
The effective date of the SI is expected to be 10 March 2020, with the zero rate to come into effect on 1 April 2020.
Current law
Current Law is included in note (2B) to Item 1 of Group 12 of Schedule 8 to the Value Added Tax Act 1994.
Proposed revisions
To amend the list in note (2B) to Group 12 of Schedule 8 by inserting, at the appropriate places the following paragraphs:
- (ba) an approved country health professional within the meaning of Regulation 213 of the Human Medicines Regulations 2012
- (ca) an EEA health professional within the meaning of Regulation 213 of the Human Medicines Regulations 2012.
The measure will specify that the insertion of the first paragraph only has effect in relation to supplies made before the end of the transition period and that the second only has effect in relation to supplies made on or after the end of the transition period.
Summary of Impacts
Exchequer impact (£million)
| 2019 to 2020 | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 | 2023 to 2024 | 2024 to 2025 |
| negligible | negligible | negligible | negligible | negligible | negligible |
This measure is expected to have a negligible impact on the Exchequer.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
This measure will impact on individuals under the care of qualified overseas based medical practitioners, who will benefit from the zero rate for private prescriptions issued by these practitioners. There is no impact on family formation, stability and breakdown.
Equalities impacts
All groups sharing protected characteristics who are under the care of qualified overseas medical practitioners based in approved countries will benefit from this measure.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on businesses. It is expected that the number of businesses affected by the measure will be small.
The online medical service companies impacted, which may be in any EEA country, and the UK dispensing pharmacies will have a one-off cost of familiarising themselves with the new VAT rules and ensuring that the change is reflected in their systems.
There are no expected on-going burdens. This measure is not expected to impact Civil Society Organisations.
Operational impact (£million) (HMRC or other)
The overall additional costs to HMRC in implementing these changes are anticipated to be negligible.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be kept under review through information collected from tax returns.
Further advice
If you have any questions about this change, contact Donald Bryant on Telephone: 03000 585 862 or by email: donald.bryant@hmrc.gov.uk. You can also contact Rosemin March on Telephone: 03000 585 531 or by email: Rosemin.march@hmrc.gov.uk.
Declaration
The Rt Hon Jesse Norman MP, Financial Secretary to the Treasury, has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.