Zero-Rating: Equipment Purchased for Medical/Veterinary Research
This relief needs to be used with caution as the legislation contains
definitions which are open to interpretation. In the event that Customs
and Excise (C&E) successfully mounted a challenge against the use
of this relief it would result
in the University having to pay the original amount of the VAT, together
with penalties and interest on late payment. The University would also
incur costs of defending such a challenge.
current VAT legislation the University qualifies for relief to zero-rate
the purchase of any relevant goods used mainly for a qualifying purpose,
where a qualifying purpose covers medical and veterinary research. Payment
for the goods must come from funds within the University, rather than
goods requested by the University and paid for through other sources.
'Medical' is equipment used for the practice
'Scientific' is equipment used for observation,
experimentation and measurement.
'Computer' means hardware, disks, VDU
'Video' includes recorders, tapes and
'Sterilising' is equipment for sterilising
medical and laboratory instruments, for example, autoclaves.
'Laboratory' is equipment such as benches
and fume cupboards.
'Refrigeration' includes ice making machines.
'Research' means original systematic investigation
undertaken to gain knowledge and understanding of the treatment or palliation
of a physical or mental abnormality in humans or animals. It excludes
'Mainly' is defined as real, substantial and continuing
and bought for that purpose. Our professional VAT advisers have previously
sought to quantify in terms of usage what this actually means, but C&E
have declined to provide any further definitive guidance. As the words
"mainly and substantial" have no specific meaning at law, the advice is
that the proportion of usage applied for a qualifying purpose must be
in excess of 50%. Also, it must be possible to identify a specific qualifying
use at the time of purchase. If it is claimed that the equipment is being
purchased for medical research, then the University must be able to identify
in which particular medical research project(s) it will be utilised.
Procedures prior to order/purchase
For items of equipment costing over 20,000
(exclusive of VAT) the use
of this relief must be sanctioned by the Finance Office. Application must
be made in writing by the Head of Resource Centre including:
Confirmation that he/she is satisfied
that the purchase falls within the definitions of this guidance note.
A description (in laymen's terms) of
the equipment to be purchased and its functionality.
The precise identification of the research
project(s) for which the equipment is being purchased. Details for each
project should include: sponsor,
title, project duration (including start and end date), funding contribution
and internal cost centre code (i.e. research ledger code).
A brief description (in laymen's terms)
of the medical research being undertaken in each project.
The other uses to which the equipment
will be put if the equipment is not being purchased for the exclusive
use in medical research. The expected proportion of usage applied to medical
research must be stated.
The Finance Office will review
such applications for zero-rating, and all high value purchases
will be referred to our professional VAT advisers for opinion. High value
items will be taken to mean
those costing over 100,000 exclusive of VAT.
Once sanctioned by the Finance Office the
Head of Resource Centre is authorised to sign a Certificate of application
for zero-rating (specimen attached to this procedure), a copy of which
should be forwarded to this Office, together with a copy of the supplier's
items of equipment costing less than 20,000 (exclusive of VAT) a Head
of Resource Centre is authorised to sign a Certificate of application
for zero-rating without prior sanction by the Finance Office, provided
that he/she is satisfied that the purchase complies with this guidance
note. Such authorisation may only be given by a Head of Resource Centre
and copy Certificates, together with a copy of the supplier's invoice,
must be forwarded to this Office. A Head of Resource Centre is still free
to seek advice from the Finance
Procedures after purchase
Unless the equipment has been purchased
exclusively for the purposes of medical research, a Resource Centre must
keep a written log of the actual usage to demonstrate that the proportion
of actual usage applied for a qualifying purpose is in excess of 50%.
The log should record for each use: the date, hours of usage, the specific
project (including the project/research cost centre code) and indicating
whether the project is medical research or other use . Each entry should
be signed by the operator. The log should be reviewed and signed by a
senior member of staff responsible for the research
on a monthly basis to ensure that the log is being properly maintained.
A copy of the log should be filed with the Finance Office at the end of
each financial year (i.e. 31 July).
4.2 If at any time the equipment ceases to
be used mainly for a qualifying
purpose, this Office should be advised as a liability to VAT may then
responsibility of Resource Centres
5.1 Resource Centres will be financially
responsible for any subsequent VAT liability, penalties and interest imposed
by C&E which arise due to a failure to:
follow the procedures
in this guidance note;
demonstrate that the actual proportion of usage applied
for a qualifying purpose is in excess of 50%; or
substantiate that either the equipment or research fall
within the definitions of this guidance note.