In the context of the current COVID-19 emergency, Revenue have published guidance (eBrief 77/20) on the zero rating of certain medical equipment and products and the impact for traders who supply or donate these goods. In addition, the VAT impact of supplying emergency accommodation is clarified.
- The zero rate will apply to the supply of the goods listed below when supplied directly to the HSE, hospitals, nursing homes, care homes, GP practices and the like, for use in the provision of COVID-19 related health care services to their patients.
- The temporary zero rating applies in the period 9 April 2020 – 31 July 2020 and is subject to review.
- The goods involved are personal protection equipment (PPE), thermometers, hand sanitiser, medical ventilators and specialist respiratory equipment such as respirators for intensive and sub-intensive care and other oxygen therapy apparatus including oxygen tents, oxygen
- Suppliers should ensure that their customer is entitled to receive the goods at the zero rate and the goods should be clearly identified on sales invoices at the zero rate.
- The application of the zero rate to these sales will not have any impact on the supplier’s entitlement to deduct VAT on costs incurred for their business
- Sales of these goods to other traders e.g. wholesalers, even if they are intended for onward supply to a health care provider, are liable at the 23% rate.
- While most medical equipment is subject to VAT at the 23% rate, certain goods are already subject to the zero rate of VAT e.g. human oral medicines, tracheostomy tubes, endotracheal tube, breathing filters (that are solely or principally for use with tracheostomy or endotracheal tubes)
- Generally when a business donates goods free of charge, self supply rules apply (except where the value is less than €20) and the donor is obliged to account for VAT on the gift at cost price, as if the gift was sold by the donor.
- Where a business donates the goods listed above (PPE, thermometers, hand sanitiser, medical ventilators etc) to the HSE, hospitals etc, the temporary zero rate will apply to the self supply.
- The donation of hot meals free of charge to charities and health care providers involved in the response to the COVID-19 crisis for distribution to vulnerable groups or for consumption by frontline staff will be concessionally disregarded by Revenue for the purposes of determining the business’s entitlement to VAT deductibility.
- Revenue will concessionally not require a business to apply the normal self-supply rules and will allow the business to maintain an entitlement to deducibility in respect of donations of food products (including cold food takeaways) and non-alcoholic drinks free of charge to charities and health care providers for distribution to vulnerable groups or for consumption by frontline staff
- The supply of temporary emergency accommodation is already exempt from VAT in accordance with VAT legislation. The exemption applies to the supply of emergency accommodation to the State/HSE/State Agencies for the purposes of being used as emergency accommodation as necessary to combat COVID-19.
- Generally, there are implications for a property owner under the Capital Goods Scheme (“CGS”) when a property is used for a VAT exempt use, including a partial or total claw back of VAT previously reclaimed, calculated on a time apportioned basis.
- The total claw back generally applies (known as a “Big Swing” Adjustment) when the change in use of the property from VATable to VAT exempt is more than 50%.
- Revenue will apply concessionary CGS treatment to the intervals during which the property is used as Emergency Accommodation and will not apply the Big Swing adjustment
- During the intervals when the property is being used as Emergency Accommodation, the VAT deductible will be calculated based on the use in the interval prior to its first use as Emergency Accommodation e.g. if in the prior interval, the property owner was entitled to reclaim 80% of VAT incurred under the CGS, they will continue to be entitled to reclaim 80% during the intervals when the property is used as Emergency Accommodation
- Normal CGS rules will apply to intervals after the property has ceased being used as Emergency Accommodation.