Hearing aid dispensers: VAT liability
The supply of hearing aids (including ear moulds) and other ancillary goods such as batteries is standard rated as is their repair - hearing aids are specifically excluded from zero rating under Group 12 of the zero-rate schedule, by virtue of legal note (4) to Group 12. However, hearing aids designed for the auditory training of deaf children may be zero-rated when supplied to a chronically sick or disabled person or to a charity for making the aid available to such a person (see Notice 701/ VAT Reliefs for disabled people and V1-7 Chapter 12 VAT reliefs for disabled people).
The supply of the professional services of a person registered in the register of dispensers of hearing aids or the register of persons employing such dispensers maintained under section 4 of the Hearing Aid Council Act 1968 used to be exempt under item 1 (e) of Group 7. However, the Hearing Aid Council was abolished from 31 July 2010, and dispensers are now regulated by the Health Professional Council. This means that their supplies are now exempt under Item 1(c) of Group 7. These services include:
- the examination of a patient;
- testing of a patient’s hearing. (This will include an audiogram test carried out by a dispenser for a doctor or an employer as well as a test carried out for a private patient); and
- providing professional advice (e.g. choice of device, instruction in use, cleaning etc).
The services of persons employing such dispensers are now covered by Legal Note 2 to Group 7
Free supplies - a hearing aid dispenser is prevented from charging for a home visit or home test unless the client has agreed to the proposed charge before the day of the visit. If such a free service is provided then it is outside the scope of VAT as there is no consideration.
Sales on approval - in accordance with the rules explained in Notice 700 The VAT Guide, the tax point for a hearing aid sold on approval is when the client pays for, or otherwise adopts, the hearing aid. If the client does neither after twelve months, a tax point arises at the end of the twelve month period unless a limit for adoption of less than twelve months was set by the supplier (in which case that is the tax point).
If the sale or approval contract commits the dispenser to providing a full refund or to making no charge should the goods not be adopted, then the dispenser’s professional services are provided free of charge. This applies regardless of whether the goods were subsequently retained and paid for or returned by the customer.