Introduction

This is a draft of updated wording for guidance on zero rating computer equipment for disabled people.

It follows recent events including: the iansyst tribunal ruling,  HMRC’s decision not to appeal it; HMRC’s consequent proposal to remove the Extra Statutory Concession on computers because it is no longer necessary; discussions on detail between BATA and HMRC; and HMRC’s suggestion at the last meeting that BATA should itself suggest guidance that would meet BATA members’ needs for clarity and consistency.

VAT guidance on the topic comes in two places – paragraph 4.6 of VAT notice 701/7 on VAT reliefs for disabled and older people and HMRC’s internal manual which is published on the web. The latter would normally be expected to have a section elaborating on the topic for VAT staff who need to give further guidance to suppliers, charities and disabled people.

Ian Litterick

22/6/2017

VAT Notice 701/7: VAT reliefs for disabled and older people

(https://www.gov.uk/government/publications/vat-notice-7017-vat-reliefs-for-disabled-people)

4.6 Computer devices and systems

Computer devices and systems are increasingly being used as aids to disability. Most are general use products which may be useful for disabled people but are designed to be used by disabled and non-disabled people alike including desktops, laptops, tablets, smart phones and eReaders. Such products can only be bought VAT free when they are sold as part of an assistive technology system. This involves pre-installing additional specialist software specifically required by the disabled individual making the purchase, allowing the complete system to be defined as designed solely for use by that disabled person. The disabled person must sign a standard declaration that they are disabled and that the supply is for their domestic or personal use. The supplier must keep this as evidence for zero rating. See 3.6 above.  The declaration may not be necessary in respect of the Disabled Students’ Allowances scheme as only eligible persons are entitled to DSA but a copy of the report detailing the purchaser’s specific requirements must be kept.

If an assistive technology (AT) system can be liable to the zero-rated VAT treatment, then other “ancillary” supplies and services may also be zero rated if made as part of a single supply. (See 5 above. “Services of installation, repair, maintenance, warranty and adaptation of goods”). This includes installation and setup, repair, maintenance and training on the assistive technology system when the training is given as a part of the supply.

Training will often be a separate supply, in which case this will be subject to VAT.

The zero-rated relief does not also extend to the separate purchase of download software licenses not pre-installed as part of an AT system. These will be treated as e-services, liable to standard rated treatment, unless the software is supplied as physical goods.

Some supplies such as a Braille printer or Braille keyboard may also be zero rateable as part of an assistive technology system, or even when sold on their own, because they were themselves designed solely for use by disabled people. Other peripherals such as scanners, printers and cameras may also be zero rated if they form part of a single supply and are ancillary to the main supply.

In schemes such as the Disabled Students’ Allowances there is an independent assessment of need. Otherwise the supplier must record and keep evidence (on the eligibility declaration for example) as to why they have zero rated such elements as part of an assistive technology system. All decisions leading to zero rating must have their evidence recorded in an auditable trail for any subsequent inspection.

In order to zero rate individual products, whether hardware or software, the manufacturer or importer must certify that it has been designed solely for use by disabled people. A copy of this certificate should be provided to any reseller who intends to zero rate the product.  If in doubt, the manufacturer or importer should apply for confirmation from HMRC as per paragraph 4.5.3 above.

This approval process is not required for each assistive technology system that includes an off-the-shelf computer device, which is why suppliers are advised to keep auditable documentation of each decision that leads to zero rating the whole system. This is so they can evidence meeting all three criteria for the zero-rating of equipment and appliances under the VAT Act 1994 Schedule 8 Group 12 item 2(g). The equipment is:

(i)            designed solely for use by a disabled person,

(ii)           supplied to a disabled person (or a charity that makes it available for use by a disabled person), and

(iii)          is for domestic or the personal use of the disabled person.

Guidance for HMRC internal manual

https://www.gov.uk/hmrc-internal-manuals/vat-relief-for-disabled-people

VRDP1600 Computers

In many cases the specific treatment of VAT on assistive technology products supplied to disabled people is not material to the exchequer – either the supply is funded from government grants through schemes such as Disabled Students’ Allowances (DSAs) or Access to Work (AtW), or the equipment is being purchased by a VAT registered employer. In these cases zero rating merely results in a redistribution between government departments. However, individual suppliers may seek rulings to ensure that they have no difficulties at VAT inspections and suppliers as a whole, e.g., through the British Assistive Technology Association, will seek rulings for the sake of consistency and fair competition. The rulings will also be important for those disabled people who are paying for equipment with their own money who may well be out of work or otherwise socially and economically disadvantaged.

HMRC has accepted the judgement of the First-Tier Tribunal in iansyst Ltd (TC05126) that assistive technology systems based on off-the-shelf computing equipment (including laptops, tablets and mobile phones) with assistive software preinstalled can be zero rated when supplied to disabled people for their domestic or personal use. Therefore, the view has been taken that such systems as a whole have been “designed solely for use by disabled people”, and thus come directly within Schedule 8 (Zero-Rating) of the VAT Act without the need for the Extra Statutory Concession which previously applied to computers.

The purpose of zero rating equipment for disabled people is to lower the additional costs that disabled people need to pay for their assistive technology, rather than to lower the cost of standard equipment that disabled people also need to buy.

Suppliers of assistive technology will generally prefer to zero rate supplies when they can do so. Thus  the question will arise: when is a supply ancillary to the main supply and so part of a single, zero rateable, supply, or when is it a separate supply and so liable to the standard rated treatment. Our guidance on Single and multiple supplies (VATSC80000) applies, but we have also given specific guidance in the past to try to encourage consistency. That specific guidance is in VAT Notice 701/7 at paragraph 4.6. and below.

An assistive technology system can be created, based on an off-the-shelf computing device, by pre-installing additional specialist software specifically required by the disabled individual making the purchase. This allows the complete system to be defined as designed solely for use by that disabled person and so be zero rateable. Some at least of the additional preinstalled software itself will also usually have been designed solely for use by disabled people, so is zero rateable in its own right when sold as physical goods rather than an electronic download. (If sold as a download, these will be treated as electronically supplied services under Article 59 (k) of EU Principal VAT Directive and Annexe II, and so be liable to standard rated treatment.) Additional preinstalled speech recognition may also allow zero rating of the complete system although the speech recognition was not specifically designed for disabled people. There may be other cases where the whole has been designed solely for use by disabled people, when none of the individual parts have.

AT systems will often be supplied with training on how to use the AT system. Suppliers may need guidance as to whether this supply is ancillary (and therefore also zero rateable) or a separate supply and therefore standard rated. A guide to being ancillary in this context is if it is recommended, quoted for (if applicable) and ordered in conjunction with the AT system, invoiced by the same supplier and supplied within a reasonable period of the main supply.

AT suppliers may also wonder about the correct treatment of extended warranties, which are often sold with AT systems.  Extended warranties are often written as insurance policies and so are exempt from VAT. However, extended warranties and insurance, when ordered sold and invoiced with the main supply, will often be ancillary to that supply and so carry the same VAT rate (e.g. zero if the main supply is zero rated.) See VAT Notice 701/36: insurance 4.2.1. They are ancillary if “they do not constitute an aim in themselves but rather a means of better enjoying the principal supply”.

Some supplies such as a Braille printer or Braille keyboard may also be zero rateable as part of an assistive technology system, or even when sold on their own, because they were themselves designed solely for use by disabled people. Other peripherals such as scanners, printers and cameras may also be zero rated if they form part of a single supply and are ancillary to the main supply.

For example, a camera could be a part of the zero-rateable system if it forms an integral part of the system to help a reading impaired person access text, but not if it is just to be used as an ordinary camera. A printer could be part of the zero-rateable system if the nature of the disability is such as to need paper based large print or printing on coloured paper, but not if the customer has no printing requirements specifically arising from their disability.

In order to zero rate individual products, whether hardware or software, the manufacturer or importer must certify that it has been designed solely for use by disabled people. A copy of this certificate should be provided to any reseller who intends to zero rate the product.  If in doubt, the manufacturer or importer should apply for confirmation from HMRC as per paragraph 4.5.3 above. The application for a letter of confirmation needs to include evidence about the design intention which may include:

  • Patent applications,
  • Design briefs,
  • Development discussions,
  • User trials,
  • Marketing literature and web pages,
  • Evidence that the manufacturer, publisher and/or importer specialise in products for people with disabilities.

None of these individual indicators are necessarily conclusive. The fact that a product can be useful to a non-disabled person is also not conclusive evidence that it has not been “solely” designed for disabled people.

Note – There has sometimes been confusion as to whether equipment can be supplied zero rated for work purposes. The VAT Act wording is “for domestic or personal use”. Assistive technology is by definition for personal use, even if this is in a work context. As mentioned above, in many cases this will be immaterial as the entity buying the equipment will be registered for VAT and the supply will not be directly to the disabled person. But purchase by an individual for work purposes can be zero rated where the personal use requirement is met.

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