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HMRC internal manual

VAT Charities

HM Revenue & Customs
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Medical and scientific equipment (“relevant goods”): Are the relevant goods going to be used for a qualifying purpose?

In order for relief to apply the relevant goods must be used for a qualifying purpose. Again, the area which creates most difficulty is items which it is claimed fall within legal notes 3(a) and 3(c). The following definitions will help to clarify what is meant by “for use in”, and what is a qualifying purpose in those legal notes. (Please remember that legal notes 3(f) and 3(g) also have a “use” test, although there are rarely problems with those.)

What is meant by the term “for use in”?

Prior to 1990 goods had to be “solely for use in medical research, diagnosis or treatment” in order for zero-rating to apply. Following representations by eligible bodies it was accepted as reasonable that minimal use of equipment in a non-qualifying capacity should not debar an element of zero-rating. The word “solely” was therefore deleted from the law. At the same time veterinary and training were added to the qualifying uses. (Please also see VCHAR14900 if computer services are involved.)

The term“for use in” means that substantial, real and continuing use in medical or veterinary research, training, diagnosis or treatment would be the main initiating factor behind the purchase. At the time the purchase is made it must be known for what specific use the item is being bought. For example, if it is claimed that equipment is being purchased for medical research then the person receiving the goods must be able to identify in which particular medical research project it will be utilised. Where the equipment is of a specialised nature, for example for research by a university medical school, it is usual for a tender/specification document to be issued to prospective suppliers. Such documentation may well contain sufficient information to establish the intended use of the equipment.

What is a qualifying purpose?

  • a. Medical and veterinary research For the purposes of this relief it is our view that research is used in its technical sense. Several requests for zero-rating have been made in respect of supplies of equipment (usually computer equipment) that is claimed to be used for medical research. We would accept medical or veterinary research as being original systematic investigations undertaken in order to gain knowledge and understanding of the treatment or palliation of a physical or mental abnormality in humans or animals. It also includes the use of existing knowledge and experimental development to produce new or substantially improved materials, devices, products and processes including design and construction. It excludes routine testing and analysis of materials, components and processes - for example for the maintenance of national standards - as distinct from the development of new analytical techniques. In general we would not accept that undergraduates engage in research in the technical meaning of the word. Furthermore we would not accept that equipment purchased for general use within a university but which may be used by post-graduates or staff involved in medical or veterinary research would qualify for zero-rating. In this context we would expect to see evidence of a programme of investigation.

  • b.Medical or veterinary training This is professional vocational training. It is the process of bringing a person to an agreed standard of proficiency by practise or instruction. It does not include general preparatory scientific studies that are required before professional training can commence, for example biology or chemistry.

    The course or programme of study should be looked at in its entirety. If it is 100% theoretical, it will not qualify as medical training but if it is part theoretical and part practical or 100% practical, it will.

    Medical training is limited to doctors, nurses, surgeons and other health professionals who are or seek to be listed on an extant statutory register. (You can find more information in Notice 701/57 Health professionals.)

    Veterinary training is limited to veterinary surgeons and veterinary nurses who are or seek to be listed on an extant statutory register.

  • c.Medical or veterinary diagnosis This the identification of diseases and examination of systems.

  • d.Medical or veterinary treatment This includes the administration of medicines, physiotherapy and surgery.

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    Non-qualifying purpose

    Where it is not possible to give an eligibility declaration which states that all the goods are to be used for a qualifying purpose then the relief is not allowable. The circumstances in which this can arise include the following:

    • common stores or stocks
    • where a qualifying use is not planned at the time of purchase
    • minimal qualifying use.

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    Common stores

    This situation occurs where an eligible body, say a university, is engaged in research across a broad scientific spectrum. Their activities include medical research as well as research in the fields of chemistry, biology and botany. For administrative purposes and for ease of access all items of general equipment, such as microscopes and test tubes, are kept in a central location. Researchers remove items from stock as they are required.

    The problem arises when new equipment (such as a microscope) is bought for stock and it is not possible to know if it will be used for a qualifying purpose or not. Zero-rating of the supply is not possible, even though it may be put to a qualifying use.