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HMRC internal manual

VAT Protective Equipment

Protective equipment: Protective boots and helmets for industrial use: To whom is the supply of protective boots or helmets made?

The law excludes from zero rating supplies of protective boots or helmets to an employer for the use by his employees. It is necessary to establish that a supply to an employer has taken place to prevent zero rating. It is not necessary to establish that a supply direct to an employee has taken place before zero rating can be applied.

The above is not a mere semantic distinction. Its effect can, for example, be seen in the wording of the Notice 701/23. Here we advise traders to take reasonable steps to ensure that they are not supplying employers for the use of their employees, and give three suggestions as to how they might achieve this. We do not advise them that they must ensure that the person whom they are supplying is an employee before zero-rating their sale.

Similarly, the Notice states that zero-rating can apply to supplies from manufacturers to wholesalers - the point being that wholesalers are not employers buying for their employees.

Disputes over supplies

A trader always has a duty to establish that he has charged tax correctly. However, if you encounter a dispute over who has been supplied, you should remember that the burden of proof is upon us, to establish that a supply to an employer for the use of his employees has taken place. For example, occasionally, an employee may buy protective boots or helmets, but his expenditure may be subsequently refunded by his employer. It would be possible to view this transaction in one of two ways:

  • the supply is direct to the employee and thus can be legitimately zero-rated; the subsequent refund is simply a private arrangement, with no VAT consequences; or
  • the supply must be standard-rated, as it is actually to the employer; the employee is merely acting as an agent.

To prove the second scenario would need written contractual evidence. This is unlikely to exist for small scale purchases of this kind, and you should also bear in mind that any output tax assessed for is likely to be reclaimable as input tax by the employer. Thus you should accept the first scenario, unless you have clear evidence to the contrary.

You may also encounter instances of employers purchasing protective boots or helmets, which they then give or loan to their employees. Here the supply to the employer is clearly standard-rated. However, the input tax is reclaimable by the employer subject to the normal rules. In the absence of any consideration, no supply exists between the employer and the employee.