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HMRC internal manual

VAT Charities

HM Revenue & Customs
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Medical and scientific equipment (“relevant goods”): Eligibility declarations

There is no legal requirement for the purchaser to provide a certificate or declaration. In order to qualify for relief you will need to be satisfied that a supplier has obtained the necessary information to confirm that the purchaser intends the criteria for zero-rating to be fulfilled. You cannot insist on this information being produced in a fixed format. However, the Department has produced various specimen declarations that are generally used. Specimen declarations are given in the relevant VAT notices. You should note that these have no legal basis and the absence or lack of completeness of any such documents would not, by itself, render the supply ineligible for zero-rating. If the supplier is able to demonstrate, in some other way, that the conditions for zero-rating have been met or, if they haven’t, that they took all reasonable steps to confirm eligibility, then, zero-rating is appropriate. The following paragraphs cover this in more detail.

An electronic version of a declaration is acceptable, but the supplier should ensure they have a full audit trail to prove the declaration has come from a genuine source. For example, the supplier should keep the email from the charity to which the declaration is attached.

Alternative evidence when specimen declarations are not used

When visiting suppliers you may find that the specimen declarations have not been used. In order to be satisfied that a supply qualifies for zero-rating, it is reasonable to expect a supplier to be in possession of the following information in some written form:

  • name of the eligible body
  • name and signature of an appropriate responsible member of the eligible body
  • description of goods or services qualifying for relief
  • statement that the goods or services are to be used for a purpose that qualifies for relief
  • date of supply
  • steps taken to confirm correctness of customer declarations.

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Annual or bulk declarations

We would normally expect a charity to give a separate declaration for each purchase of relevant goods. However, where a charity places an order for a regular supply of identical products an annual or bulk declaration can be accepted.

Officers may receive requests from suppliers to enter into formal, written agreements regarding annual or bulk declarations. The decision whether or not to enter into such an arrangement should be made locally, taking into consideration local knowledge of the supplier and the systems they have in place.

In addition to the normal information required on individual declarations the supplier should also have systems in place that enable them to confirm with the customer that:

  • the status of the organisation and/or the goods has not changed
  • any goods said to be covered by such a declaration are indeed covered eg they have been purchased with charitable funds and are to be used for qualifying purposes.

The systems should be suitable for audit by visiting officers and the supplier should be able to demonstrate what steps they have taken to confirm that supplies are covered by the annual/bulk declaration. Details of the systems/procedures etc. to be used should be detailed within the written agreement. Any agreement should be time limited with provision for regular review.

The use of annual/bulk declarations, once we have agreed their use, is a matter of agreement between suppliers and their customers. Customers cannot be compelled to submit such declarations and, if they choose to, can continue to provide declarations on an individual transaction basis. Where officers find that suppliers have used annual or bulk declarations without entering into a formal agreement with us they should be strongly encouraged to do so. Lack of a formal agreement does not however prevent a supplier using annual/bulk declarations if they agree with some, or all, of their customers to do so. As this may increase the risk for both the supplier, the customer and HMRC, suppliers should be reminded of their responsibilities to correctly account for VAT.

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Completion of declarations by eligible bodies

Eligible bodies, such as educational or research establishments, can be large organisations and the detail regarding the purchase and use of goods that may be eligible for zero-rating are usually known to the particular department ordering or using the piece of equipment rather than the finance department who is normally responsible for the organisation’s VAT affairs. The finance department usually requests a responsible officer of the specialist department ordering or purchasing the goods or services to make the declaration.

Examination of the documentation and systems used by several eligible bodies indicate that the following points of best practice should be strongly encouraged:

  1. The declaration the finance department asks the specialist department to make should contain as much basic information as possible, for example:
* the department buying or ordering the goods
* a person within the department who can be contacted for further information regarding the goods
* a description of the goods being purchased or ordered
* what category the goods fall under eg medical, scientific or laboratory equipment
* what the goods are to be used for e.g. medical or veterinary research or training
* a statement to be signed by a responsible officer within the department to the effect that they are aware of and understand the rules concerning the zero-rating of eligible goods, and confirming that the goods subject to the declaration are eligible for zero-rating
* a note that the declaration does not authorise zero-rating and that it is the responsibility of the supplier to ensure that the goods are eligible before zero-rating the supply.
  1. Some finance departments provide, in varying degrees of depth, an aide-memoire to specialist departments to assist them in deciding whether purchases are eligible for zero-rating. Communication of some kind between the finance and other departments regarding the topic should be encouraged.
  2. Where the individual items are highly specialist the declarations can be cross-referenced to catalogues, details of research projects to be carried out using the goods, or the procurement/ tendering process etc. Such information may help confirm the type and use of the goods.
  3. Finance departments should be encouraged to have their own systems and controls in place which provide them with some assurance that the declarations made by specialist departments are correct.

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What can you do if declarations are issued incorrectly?

The onus for ensuring that a supply is eligible for zero-rating lies with the supplier, and it is the supplier who must receive any assessment for under-declared VAT. There can be difficulties for the supplier in being satisfied that the goods or services are actually put to the purpose for which zero-rating is allowed. However we recognise that the supplier can only take all reasonable steps to establish that the customer is eligible for relief and the goods are put to a qualifying use.

If all reasonable steps have not been taken, or if you suspect that the supplier has knowingly zero-rated ineligible supplies, you should assess the supplier for the under-declared tax. Note: If the supplier has zero-rated goods that are not ‘relevant goods’ you should always assess.