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HMRC internal manual

VAT Charities

Medical and scientific equipment (“relevant goods”): Funding for the purchase of qualifying equipment

The final point on which you must be satisfied before agreeing that zero-rating is appropriate for a supply of relevant goods is that it has been paid for out of funds provided by a charity or from voluntary contributions.

Charitable funds and voluntary contributions

Charitable funds are those which are held by a charity and can derive from any number of fund-raising sources. Voluntary contributions are similar but do not necessarily have to be held by a charity. For example, a commercial company might collect contributions from its staff which it uses to buy a piece of medical equipment for a charity. This would qualify as having been purchased with voluntary contributions.

An important point is that 100% of the funding must be from funds provided by a charity or from voluntary contributions. If the charity only makes a contribution towards the cost of purchasing equipment, or if the level of voluntary contributions needs to be supplemented by an eligible body’s own funds, the supply of goods does not qualify for zero-rating.


All universities are charities and usually qualify as an eligible body by virtue of Group 15 Note (4)(e). This covers a research institution whose activities are not carried on for profit. Once a university qualifies because of its research activities, the entire university can be treated as an eligible body - the eligible body status is not restricted to the research department.

As you can see universities therefore qualify under both categories which must be present for the relief under Items 4 and 5 of Group 15 to apply - they are eligible bodies and funds are provided by a charity. Any of the university’s funds, from whatever source, can be regarded as charitable funds. The university can receive funds as a charity (perhaps through grants) and spend them as an eligible body, effectively wearing two hats at once. In this way all relevant goods bought by the university for use in a qualifying capacity will qualify for zero-rating (for example, medical equipment purchased for use in medical training). Clearly goods purchased for a non-qualifying use, such as laboratory equipment that will not be used for medical or veterinary research/training etc, will not meet the criteria for zero-rating.

The same situation arises with other higher education institutions which qualify as a charity and as an institution carrying out research for no profit.