Policy paper

VAT: zero-rating of women’s sanitary products

Published 24 March 2016

Who is likely to be affected

Women.

General description of the measure

This measure enables the future application of the VAT zero-rate on supplies of women’s sanitary products that are currently subject to VAT at the reduced rate of 5%.

Policy objective

To ensure that supplies of women’s sanitary products (pads, towels, liners and tampons) are supplied free of VAT.

Background to the measure

The Prime Minister secured agreement with his European counterparts at the March European Council to welcome the intention of the Commission to enable increased flexibility for member states with respect to zero and reduced rates of VAT.

The UK is using this opportunity to provide for the reduction of VAT on women’s sanitary products to the zero-rate.

Detailed proposal

Operative date

The legislation will come into force on a day appointed by HM Treasury regulations. The Government intends to make these regulations as soon as possible following Royal Assent.

Current law

Group 4, Schedule 7A, VAT Act 1994 permits the reduced rate of VAT to apply to the supply of women’s sanitary products.

Proposed revisions

Group 4 of Schedule 7A, VAT Act 1994 is withdrawn and the same legislation is now inserted as Group 19 into Schedule 8 (the zero-rate schedule). This has the effect of making supplies of women’s sanitary products that were previously subject to the reduced rate now subject to the zero-rate.

Summary of impacts

Exchequer impact (£m)

This measure is expected to decrease receipts by approximately £15m per annum.

The final costing will be subject to scrutiny by the Office for Budget Responsibility.

Economic impact

The measure is not expected to have any significant economic impacts.

Impact on individuals, households and families

The measure is likely to affect 18 million women mainly of child bearing age. They will be able to acquire supplies of their sanitary products at a lower cost providing their supplier passes on the VAT reduction.

The measure is not expected to impact on family formation, stability or breakdown.

Equalities impact

The measure mainly affects women of child bearing age. It ensures that their sanitary necessities, which are not required by the rest of the population, are not taxed.

It is not anticipated that this measure will impact on any other equalities group.

Impact on business including civil society organisations

This measure is expected to have a negligible impact on businesses and civil society organisations.

Those businesses (manufacturers, distributors and retailers of women’s sanitary products) affected by the rate change will incur a negligible one-off small cost updating their accounting systems to reflect the change in the VAT rate of women’s sanitary products. There are not expected to be any additional on-going costs.

Operational impact (£m) (HM Revenue and Customs (HMRC) or other)

It is not anticipated that implementing this change will incur any additional costs/savings for HMRC.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

This change does not necessitate any monitoring since it allows for the reduction of all similar products to the lowest rate of VAT permissible - zero%.

Further advice

If you have any questions about this change, please contact John Egerton on email: john.egerton@hmrc.gsi.gov.uk or Michael McRae on email: michael.mcrae@hmrc.gsi.gov.uk.

Declaration

Financial Secretary to the Treasury David Gauke 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.