Dispensing by a pharmacist: Scope of the zero rate
a. Community pharmacies
Most dispensing in a traditional high street retail pharmacy is zero rated under item 1 or one of the concessions outlined in VATHLT6070 and VATHLT6080. Hospitals or nursing homes that do not have their own pharmacy (e.g. a cottage hospital or a specialist clinic) usually obtain qualifying goods from a high street pharmacist. Supplies to them by the pharmacist will normally be standard-rated. When dealing with hospitals and nursing homes, pharmacists may only zero-rate the dispensing of prescribed qualifying goods if the goods are for an individual named patient and they are satisfied that either:
- the goods will not be used while the patient is within the institution; or
- one of the concessions outlined in VATHLT6070 & VATHLT6080 applies.
Where a pharmacist is called on to supply prescription-only medicines in an emergency, the zero rate will apply if these emergency supplies are made on the direction of a doctor and if the doctor provides a prescription within 72 hours. If the request for an emergency supply is made by a patient, then the conditions of item 1 are not met (because the goods are not supplied on the prescription of a doctor) and so the supply cannot be zero-rated.
b. Hospital pharmacies
Where an NHS hospital pharmacy supplies qualifying goods to out- or discharged patients as part of the NHS’s statutory obligation of care, this is not a business supply for VAT purposes. Other than this, hospital pharmacies may zero rate dispensing of qualifying goods to out- or discharged patients for their personal use, including dispensing by:
- pharmacies in private hospitals;
- independent pharmacies situated in NHS hospitals (e.g. where the pharmacy is run by a private company) ( see c below) ; or
- NHS hospital pharmacies dispensing to private patients.
c .External pharmacy companies in NHS hospitals
To improve services to patients, a hospital may enter into a contract with a third party pharmacy company to operate a pharmacy in the hospital to dispense qualifying goods to out-patients. The same criteria for zero-rating applies to pharmacy companies within a hospital as to normal community pharmacies.
If such an arrangement is entered qualifying goods can only be zero-rated if they meet all the conditions listed in VATHLT6020 above.
Drugs administered to the patient whilst they are an in-patient or attending a hospital clinic are not covered by the zero-rating provision.
Where a pharmacy company has a contract to operate a pharmacy in an NHS hospital pharmacy a typical system will operate as follows:
- A hospital consultant / doctor will issue a prescription to a patient.
- The patient will take the prescription to the pharmacy where their qualifying goods will be dispensed by a pharmacist.
- The patient will take the qualifying goods home and self administer.
- The pharmacy company will invoice the hospital for the goods dispensed and the dispensing fee. These will both be zero-rated as with a community pharmacy.
Any other charges made (e.g. management or administrative) will follow their normal VAT liability as they are not covered by the zero-rating provisions for qualifying goods.