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HMRC internal manual

VAT Charities

Medical and scientific equipment (“relevant goods”): Are relevant goods being supplied?

The goods that qualify for relief are listed in Note 3 to Group 15. The area which creates most difficulty is items which it is claimed fall within legal notes 3(a) and 3(c). These comprise medical, scientific, computer, video, sterilising, laboratory or refrigeration equipment. The following definitions will help clarify which equipment is regarded as falling within these categories:

Medical equipment: equipment which is required for the practice of medicine.
Scientific equipment: equipment used for observation, experimentation and measurement such as microscopes, thermometers and precision weighing machines.
Computer equipment: equipment such as VDUs and keyboards. However where a complete network is being supplied only those items which are to be used for a qualifying use are eligible for relief; not the whole network. Note that here, computer software is not goods or equipment though relief could be available under legal note 10 (see VCHAR14900).
Video equipment: includes video recorders, tapes, video cameras. Ordinary and digital cameras are not included in this category. (Digital cameras do not qualify as a part or accessory to computer equipment either). Note: As technology advances video cameras will become obsolete. It is extremely unlikely that the relief will be amended to reflect this.
Sterilising equipment: equipment for sterilising medical and laboratory instruments and includes autoclaves.
Laboratory equipment: equipment such as laboratory benches, fume cupboards, test tubes, beakers and Bunsen burners but does not extend to the complete furnishing of a laboratory.
Refrigeration equipment: includes items such as ice making machines.

Note: The equipment listed in the above table will only qualify for zero-rating if it is used for a qualifying purpose (see VCHAR14850 for more guidance on qualifying purpose). For example, a computer network can only qualify for relief in its entirety if all the components are used for a qualifying purpose. Individual VDUs, keyboards, MOUSE, floppy disks etc must each be supplied for a qualifying purpose in order to obtain relief. The term “relevant goods” has been considered by many tribunals. In the case of the David Lewis Centre (VTD 10860) the tribunal considered whether an observation window to a soft play area in a centre for people with epilepsy was a piece of medical equipment and as such “relevant goods”. The tribunal found that the window was a piece of diagnostic equipment and aided the treatment of the people at the centre. The tribunal concluded that the function of the observation window was medical and within the definition of “relevant goods”. However the case proceeded to the High Court (STD 485) where the decision was overturned. The High Court said:

There is a test which is twofold: first the goods must be medical; and secondly they must be supplied for use in one of the medical areas set out in the definition.”
“As I see it, the question which I have to ask myself is this; at the time of the supply…. could these two-way windows sensibly be described as ‘medical goods’? Bearing in mind the dual test which is necessary it seems to me that it is not possible to describe the window as ‘medical goods’. They were goods, certainly, which were used for diagnosis and treatment but they were not medical goods. In those circumstances, it seems to me that the tribunal whose decision I have to consider was wrong and I find so.”  

This decision emphasises the importance of the two stage approach - are the goods supplied “relevant goods” and have those goods been used for a qualifying purpose (see VCHAR14850)?

In the case Supplier Ltd (VTD 18247) the tribunal considered whether specialist animal cages were laboratory equipment and as such “relevant goods”. (This tribunal decision was anonymised at the request of the appellant.) In finding that the cages were “relevant goods” the tribunal said:

“the specialist cages had a number of features identifying and limiting their use to a specified field, which, in this appeal, is that of a laboratory and that they are not suitable for use for other purposes.” The tribunal concluded that the cages were made ”of higher quality materials than those used for pet husbandry and were not available at retail outlets.”

In Research Establishment (VTD 19095) the tribunal considered whether an air ventilation system was laboratory equipment and as such “relevant goods”. The tribunal found that the ventilation system was laboratory equipment, giving the following reasons in their decision:

“The equipment is not a general air supply to the whole complex. It is far more specific than that…for example, the equipment does not supply air to the main corridors.”

The tribunal noted that the equipment incorporated the following special features:

“the air moved by …piston effect”

“specially designed to ensure inward airflow did not create any draughts”

“rate of change of the air in the rooms was many times that of a normal air conditioning unit”

“high precision filtering of the outgoing air”

“filters and vents could be sterilised with minimum handling”

“designed to create invisible ‘walls’ of air within rooms”

“air pressure could be controlled in addition to temperature and humidity”

“items were to be made [for Research Establishment] to specific individual designs”.

The tribunal added a final comment “that it does not regard this decision as a precedent for any other taxable person.”  

We accept that, in this case, an advanced air filtration and ventilation system was installed - it was designed to meet the specific needs of a limited number of specialist laboratory rooms and it did not serve common areas such as offices and corridors. Consequently, we now accept that such specialist equipment is laboratory equipment when, as a whole, it requires a high level of specification, functionality and performance to meet the purpose for which it is necessary.

However, we continue to maintain that low specification air ventilation/filtration systems and standard air-conditioning systems are not “relevant goods” and do not qualify for relief.