VAT zero rating for personal protective equipment
Updated 25 March 2021
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Who is likely to be affected
Businesses and individuals purchasing personal protective equipment (PPE) for protection from infection.
General description of the measure
This is a new temporary zero rate that will apply to supplies of PPE as defined by Public Health England’s coronavirus (COVID-19) PPE guidance on 24 April 2020.
The measure will take effect from 1 May to 31 October 2020.
Policy objective
The policy objective of this relief is to relieve the burden of VAT on the price of purchasing PPE used for protection from coronavirus by front line workers.
This will particularly aid sectors that cannot recover VAT on such goods due to their VAT exempt status, such as care homes, but will benefit all consumers.
Background to the measure
The temporary relief is being introduced as an urgent response to the coronavirus emergency.
Its main objective is to relieve businesses, particularly in the healthcare and residential care sectors, of the burden of tax on essential infection protection equipment needed to deal with the emergency.
Under current UK VAT law, the standard rate of VAT (20%) applies to the sale of PPE. However, the EU Commission has recently indicated support for temporary VAT reliefs (including zero-rates) directly linked to the efforts being undertaken to mitigate the impacts of the coronavirus pandemic. This means the UK now has more scope to review the VAT treatment of these supplies.
As the government has decided to implement this as an emergency measure in response to the coronavirus crisis, it will not be possible to consult in the time available.
Detailed proposal
Operative date
These changes will apply from 1 May 2020 and remain in effect until 31 October 2020.
Current law
Currently under VAT Act 1994 a standard rate of 20% applies to PPE.
Proposed revisions
A temporary zero rate will be introduced via a new Group 20 to Schedule 8 of the Value Added Tax Act 1994.
This measure will take effect from 1 May 2020, for six months, until 31 October 2020. It is intended that the negative procedure statutory instrument will be laid before Parliament on 30 April. The extent and application will be the whole of the United Kingdom. There are no matters relevant to English Votes for English Laws.
The 21-day rule will be breached because of the urgent need to introduce the relieving measure in response to the coronavirus health emergency.
Summary of impacts
Exchequer impact (£m)
| 2020 to 21 | 2021 to 22 | 2022 to 23 | 2023 to 24 | 2024 to 25 | 2025 to 26 |
| -960 | – | – | – | – | – |
These figures are set out in Table 1.1 of Spending Review 2020 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Spending Review 2020.
The measure is expected to decrease receipts. The final costing will be subject to scrutiny by the Office for Budget Responsibility and will be set out at the next fiscal event.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals
This measure is expected to have a positive impact on individuals who purchase types of PPE that fall within Public Health England’s guidance. This measure temporarily removes VAT from these products.
This temporary relief is being introduced as an urgent response to the coronavirus emergency. Customer experience is expected to stay broadly the same as it does not change how individuals interact with HMRC. This measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
It is not anticipated that there will be impacts for those in groups sharing protected characteristics.
Impact on business including civil society organisations
This measure is expected to have a positive and negligible impact on businesses or any civil society organisations that purchase types of PPE that fall within Public Health England’s guidance.
The new zero rate will relieve the burden of VAT on the price of PPE sold in the UK. In particular it will assist the NHS and care homes as they are predominantly likely to purchase these products as front line workers during the coronavirus crisis.
Care homes and other such providers within the welfare sector that also use PPE will benefit from the VAT relief. Their supplies are usually exempt (or partially exempt) from VAT. This means that, at present, they are unlikely to be able to recover any VAT on PPE.
The NHS carry out a non-business activity and their VAT burden is aided by annual funding to potentially cover the cost of the VAT. The zero rate ensures that costs are not increased.
The impact on business admin burdens is expected to be negligible.
One-off costs will include familiarisation with the new rules and considering whether the PPE they purchase falls within Public Health England’s guidance. For most supplies, this is expected to be straightforward.
A further one-off cost could include updating software or changing systems to account for VAT at the zero rate. There are not expected to be any ongoing costs.
Temporary, ongoing savings will include not having to calculate VAT that would have been due on these types of PPE and also no longer having to make these payments.
Customer experience is expected to stay broadly the same as it does not significantly change how businesses interact with HMRC.
Operational impact (£m) (HMRC or other)
HMRC will incur negligible costs in implementing this change.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be kept under review through communication with affected taxpayer groups and the Department of Health and Social Care.
Further advice
If you have any questions about this change, email ppe@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.