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HMRC internal manual

VAT Charities

HM Revenue & Customs
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Medical and scientific equipment (“relevant goods”): Charitable institutions providing institutional care

What tests must be met?

The amended legislation sets out three tests that must be met in order to qualify as one of the charitable institutions, and thus be eligible for zero-rated purchases of any of the relevant goods in Legal Note 3 to Group 15. These are:

  • it must be a “relevant establishment” providing care or medical or surgical treatment, and
  • the majority of the persons who receive that care or treatment must be handicapped, and
  • the relevant goods must be used in the relevant establishment.

If these tests are satisfied then the organisation can purchase the relevant goods at zero-rate.

What is a “relevant establishment”?

A relevant establishment is one of two things:

  • a day-centre (Note (4B)(a) to Group 15), or
  • an institution which is approved, licensed or registered or is exempted from those requirements (Note (4B)(b) to Group 15).

A day-centre must be something more than a social or recreational centre. It must concentrate on providing some form of care or treatment to those attending. Examples of centres that would qualify include physiotherapy centres for disabled children or charitable establishments that run daily rehabilitation or training classes for adults.

Institutions that are approved, licensed or registered include the wide range of residential care institutions such as nursing homes for disabled adults or residential homes for disabled children.

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The majority test

The majority of those cared for in a relevant establishment must be handicapped. We will accept that the majority of people provided for are disabled if this is the normal and consistent pattern for the relevant establishment, and will not refuse claims for zero-rating simply because an establishment falls slightly below this level temporarily. This pattern should be evident from the home or day-centre’s own records. If those records show that over an extended period of time, 51% or more of the people who are residents of a home or of those who attend a day centre are disabled people, the body will be eligible.

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How must the relevant goods be used?

The relevant goods (including adapted motor vehicles) must be used in the relevant establishment. If, for example, a charity provided a range of activities which included the running of a home for disabled children, then its vehicle would have to be used to transport residents of that home and not put to more general use.