The VAT office appears to have been fairly quiet about a change from the 1st October 2001, which allows for the zero rating of incontinence products on the shelf (thus making them appear cheaper to prospective private customers). There is no longer the requirement for the customer to provide a written declaration confirming they are eligible for VAT relief.

You may have seen an article about this in the Pharmaceutical Journal at the end of September 2001. The NPA are including details in their newsletter. A copy of the details published by the VAT office are given below.

Users of Ob-serve Pharmacist using the Direct Calculation or Apportionment VAT schemes, since the purchase of these items includes VAT, will probably need to keep a separate total of the sales (at retail price) and include them in the NHS adjustments screen on the VAT calculation (in a similar way to paid & private scripts).

Please contact Ob-serve if you need any further assistance.

VAT partial exemption - supplies excluded from standard method of calculation

Vat And The Retail Sale Of Incontinence Products

This Business Brief announces easier arrangements for zero-rating incontinence products purchased through retail outlets by entitled people. The changes take effect from 1 October 2001.

Background

People who are incontinent and live in their own homes are entitled to buy incontinence products at the VAT zero rate. A condition of the zero-ratinq is that retailers obtain a declaration from the purchaser confirming that they are eligible for VAT relief.

Some retailers find it difficult and expensive to adapt systems to meet the needs of customers who are eligible to buy these goods at the VAT zero rate. Equally, many incontinent people are unaware that they are eligible for VAT relief, or are simply reluctant to draw attention to their condition.

Customs, after consultation with manufacturers, retailers and representative bodies, are now introducing easier arrangements in order to improve access to the VAT zero-rate by people who are eligible.

New VAT treatment for retail sales from 1 October 2001

The main change is that eligible incontinence products, for retail sale, may be zero-rated on the shelf. In practice, this means that an incontinent person may purchase incontinence products at any till and receive automatic zero-rating.

There will no longer be a requirement for the customer to provide a written declaration to the retailer confirming they are eligible for VAT relief. Due to the specialist nature of these products, Customs believe that only entitled people are likely to buy them.

Internet and mail order sales

Supplies of eligible incontinence products over the internet or by mail order also qualify for VAT relief providing they are made to individuals and not institutions.

Restrictions

Customs will expect retailers, Internet and mail order suppliers to nave a signed declaration, or other supporting evidence that the supply is to an incontinent individual and not to an institution such as a nursing home, for customers who buy more than:

200 disposable pads, or 50 washable pads, or 5 collecting devices, of 10 pairs of waterproof or leak-proof underwear.

Goods that qualify for zero rating on the shelf Disposable and washable incontinence pads including pads that are incorporated in briefs, underwear designed for use by an incontinent person (i.e. underwear that is waterproof or leak-proof) and collecting devices.

Nursing homes/National Health Service

These new measures do not change the VAT liability of incontinence products. Consequently, they do not affect the VAT position of nursing homes, hospitals or the NHS who continue to remain ineligible for VAT relief on the purchase of incontinence products.

"The decision to remove VAT from continence pads' shelf price is a real step forwards. It means that people will pay a fair price and it also removes the embarrassment of trying to reclaim VAT at the shop till. We hope that retailers will draw customers' attention to the lower prices when they come Into effect on 1 October. This will have a real effect on the lives of thousands."