Mobile phones and computers will be free of VAT if they are preloaded with software designed solely for the use of disabled people, says HMRC.
The decision follows lengthy discussions between BATA and HMRC and a VAT tribunal that found in favour of AT solutions provider Iansyst.
At present only old-style desktop systems with processor, keyboard and monitor are able to be zero-rated.
Iansyst argued that its Capturatalk literacy support software supplied with a mobile phone was designed solely for disabled people and should be zero-rated even if it could be used by non-disabled people.
“We find that, looking at the package as a whole at the time of supply, the supply of a mobile device with Capturatalk pre-installed would meet the requirements of a piece of equipment designed solely for use by a handicapped person, and should therefore be zero-rated for VAT purposes,” the tribunal ruled..
“This is a breakthrough decision,” said BATA executive director John Lamb. “We are seeking clarification whether the ruling also applies to tablets.”
HMRC recommends suppliers obtain a declaration of eligibility from each disabled person that they supply systems to.
In time the current ‘zero-rating of central processor’ and ‘composite rate of VAT computer systems’ will be phased out.
Here is the text of an email dated July 15 from Michelle Stokell, Charities Senior VAT Policy Adviser at HMRC:
I have been considering your further representations and the decision of the tribunal in the Iansyst Limited case, which I believe you were involved in.
HMRC will now accept that mobile phones and computers that are pre-loaded with software that is designed solely for use by disabled people are zero-rated when they are sold to disabled people for their personal and domestic use.
We recommend that suppliers obtain a written eligibility declaration from each disabled person to whom they sell a zero-rated product that is designed solely for use by a disabled person.
The suggested template for this can be found on the Government website at:
The declaration should be retained, along with any other evidence to support the zero-rating, as part of the suppliers’ VAT records.
As we are now accepting that computers that are pre-loaded with software that is designed solely for use by disabled people fit within the requirements of the existing Schedule 8 (Zero-Rating) of the VAT Act, we will be withdrawing the extra statutory concessions on the ‘zero-rating of central processor’ and ‘composite rate of VAT computer systems’ in due course.
I hope that I have been able to address your main concerns.