VAT News

VAT Update - HMRC policy re donated mask and hand sanitiser


Further to our recent newsbyte regarding the potential VAT issues that will arise where universities or colleges assist the NHS in the production of protective masks to the NHS, we are able to provide an update. The points of concern were twofold:

  1. If the organisation manufacturing the mask is unable to recover VAT – as a university or college would be - they wouldn’t be able to issue a zero rate certificate to the suppliers of materials used to make the protection masks because those materials won’t qualify as medical equipment – it would only be the finished masks that would be the qualifying goods. The zero rating applies specifically to the medical equipment that is being purchased it doesn’t cover supplies used to manufacture that equipment.  VAT would therefore be chargeable to a university or college and not recoverable by them.

  2. The second aspect relates to the onward supply to the NHS by a university, college or business donating the masks. VAT guidance only allows zero rating to apply to charity funded medical equipment where they are deemed to be “relevant goods” – which masks will be - and are supplied to an “eligible body” – which the NHS is.  To qualify for relief the eligible body (NHS) must pay for the relevant goods with funds provided by a charity or from voluntary contributions. 

This is where the VAT issue arises because the NHS aren’t paying for the masks, they are being provided free.  If NHS can’t provide a certificate, then the supplier/donor would need to account for VAT on the donation under the business gift rules.

In discussion with HMRC officers regarding a client specific situation HMRC have confirmed in writing that both points are correct – the purchaser of the materials cannot access a zero rate relief on the materials bought in and the onward supply of the manufactured masks cannot qualify for zero rating as they are being donated and therefore VAT has to be accounted for on those “supplies” under the gift rules - which triggers VAT on the value of the cost of the items.

HMRC have confirmed that they have no concession in place, nor will there be a concession put in place to enable the supply to be relieved of this VAT cost.

The same applies to supplies of hand sanitiser manufactured and donated to the NHS although HMRC have announced a temporary measure specific to hand sanitiser for universities and colleges to access:

“Temporary measure to allow duty-free spirits (DFS) to be moved from universities and colleges to hospitals for medical use.

As part of HMRC’s response to COVID-19 and the associated increased demand from hospitals for duty-free spirits (DFS), HMRC has introduced the following temporary measure for universities and colleges that have an authorisation to receive and use DFS.

With immediate effect an additional general condition is included in authorisations held by universities or colleges to receive and use DFS for scientific or medical purposes that allows unwanted or unused DFS to be disposed of by donating or supplying that DFS to hospitals, provided the hospital has an authorisation to receive and use DFS. Full records must be kept by the university or college of the amounts of DFS supplied and the name and address of the hospital the DFS was supplied to. There is no need to apply to HMRC to make use of this condition.

This measure is temporary. HMRC will provide at least 30 days’ notice before the measure is withdrawn.”

We continue to raise these issues through all routes available in order to highlight the burden that VAT is creating in this regard and will update as we hear further news. As ever do get in touch with your Centurion VAT contact should you require specific VAT help and guidance or contact us through

For the avoidance of doubt, the content recorded in this news article does not constitute formal advice and we do not guarantee the accuracy of any information provided at the time of reading. It is always recommended that you should seek professional advice before acting on any of the news articles or information included.

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