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HMRC internal manual

VAT Retail schemes guidance

Special Arrangements for certain professions and trades: Women's Royal Voluntary Service (WRVS) hospital units: Introduction

In many hospitals, WRVS units operate facilities such as a canteen, hospital shop, or ward trolley service. In principle, supplies are taxable in the usual way; but the sale of certain goods to in- and out-patients is regarded as exempt under Schedule 9, Group 7, item 4 to the VAT Act 1994 as coming within the provision of care. Such goods are:

  • all beverages that may be sold without an excise licence (such as tea, coffee, fruit juices and soft drinks but not intoxicating liquors);
  • food such as cakes, biscuits, sandwiches or fruit;
  • ice cream or similar frozen products;
  • chocolate or other confectionery;
  • potato crisps or similar snack products; and
  • nuts.

This exemption does not extend to either:

  • sales of stationery, toiletries or other items which are not edible as food or beverages; or
  • sales to staff or visitors.

Output tax is usually calculated by apportioning DGT on the basis of the cost of purchases (like the first apportionment scheme) but, because zero or standard rated purchases can become exempt supplies, this will give an incorrect result.


To resolve these difficulties, a special adaptation (to what was scheme B) was agreed in 1985. This works by establishing both:

  • the tax-inclusive DGT for non-catering supplies (by marking up purchases to their ESPs); and
  • the tax-inclusive DGT for catering supplies (by deducting non-catering DGT from total DGT),

and applying an estimated percentage of those catering supplies which are standard-rated (those not for patients) to the catering DGT. See VRS8510, VRS8515 and VRS8520 for details of the adaptation.

Partial exemption

Most WRVS units make some exempt supplies (such as supplies of catering to patients within the hospital) and incur input tax relating to those supplies. Such units are therefore partly exempt and are able to recover input tax only to the extent that it relates to their taxable supplies, unless their exempt input tax is within the partial exemption de minimis rules. If that is the case, they can also recover their exempt input tax. Partly exempt units may have difficulty in calculating their recoverable input tax and VRS8520 also provides guidance on how they can work this out.

Authorisation of the adaptation

WRVS units may be allowed to operate the adaptation to the retail scheme provided that:

  • the unit is unable to operate one of the published schemes; and
  • appropriate records are kept.

Any agreement must be confirmed in writing.

This applies equally to the partial exemption method. Although it is very similar to the current standard method (which, of course, need not be agreed in writing), it differs to the extent that there is an element of estimation in the values of the supplies. By setting out the terms of the method in writing there can be no doubt as to precisely what has been agreed between the parties.