Information about VAT, dyslexia, disabilities and getting VAT relief or zero rate VAT.
VAT is a tax chargeable on many products supplied to any customer within the European Union. Information in this article is based on the Value Added Tax Act 1994, in particular Schedule 8 ( Group 12), which deals with zero-rated supplies of goods and services. The current UK VAT rate is 20%.
We have to charge VAT on everything except as follows:
- book sales;
- we do not charge VAT to customers whom we invoice and ship to outside the European Union;
- VAT-registered organisations in other European Union countries should give us their EU-VAT number, so that we do not need to charge VAT;
- individuals with disabilities, who are buying products that have been designed solely for people with disabilities, for their own personal or domestic use, can claim VAT relief (sometimes know as VAT exempt or exemption, although this is technically the wrong term);
- charities who are buying products designed for disabled people can, in certain circumstances, also claim VAT relief;
- charities can sometimes buy diagnostic products with VAT relief.
The VAT position on dyslexia and other disabilities:
Dyslexia, for VAT purposes, can be a disability if it “has a substantial long-term adverse effect on ability to carry out normal day-to-day activities”. This includes reading, writing, remembering and studying.
To claim relief from VAT you must sign the appropriate certificate and send it to the supplier (see How do I apply?, below). On our website you can make the declaration quite simply in the shopping cart.
But VAT relief does not apply to products which are designed for ordinary use and happen to be used by someone with a disability, and so does not apply (for example) to word processing software, even when configured for use by people with disabilities. In our context, it does apply to a number of products, for example Texthelp Read & Write, which were designed for dyslexic people, and to parts of the hardware on which they run. But we must charge VAT, even for these products, when we sell them to someone who has no acknowledged disability.
By a special concession we can give VAT relief on dictation software, but only when it is purchased pre-installed on one of our computer systems and when it “enables a disabled person to use the computer system or other software effectively, or to carry out tasks effectively when otherwise they could not.” (VAT Notice 701/7/02 Para 9.2).
The VAT relief belongs to the disabled individual (or parent or carer acting on their behalf). However, you can get VAT relief if you are a student claiming DSA (Disabled Student’s Allowance) even if your funding body pays us directly: we invoice you, but send the invoice to the funding body, for payment by them.
HMRC have an information page (Reduced-rate VAT on equipment and vehicles for disabled people) on their website.
Charities can also claim relief from VAT:
- when buying the same products designed for disabled people, according to VAT Notice 701/1/95 Para 6.1.2;
- as long as they are buying it with their own or other charitable funds;
- (but not if paid for by a commercial organisation commissioning particular research, for example).
This also applies to computer hardware, as below:
- only if it is specifically for use by disabled people (e.g. in a disability resource centre);
- not if it is for general computer room or library use.
What is a charity?
“Charities” include educational organisations such as universities and many schools, even when not registered as charities. A charity:
- does not have to be registered to be eligible for VAT purposes;
- includes non-profit organisations providing care for dyslexic or disabled people or providing education;
- normally includes, for example, local Dyslexia Associations;
- includes you if the Inland Revenue treats you as a charity;
- also includes charitable organisations in other EU states, as long as they show that they meet these conditions.
A charity is not limited to domestic and personal use, if the products (designed for disabled people) are paid for with its own funds or from voluntary donations (both “voluntary funds”), whether given to the charity or bought by it. Thus the items could be used in a resource centre.
Charities which exist to provide care for people with disabilities or to do research sometimes think that they can avoid VAT on general computer equipment, software and accessories, if the goods are funded by themselves or other charity or voluntary contributions. (VAT Notice 701/6 Charity Funded Equipment). But this is only true if the goods are for medical or veterinary research, diagnosis or training (see Paras 4.2.4 and 4.2.5 ). This will rarely apply to products for dyslexic or disabled people, except for Diagnostic Products below.
Which products are eligible?
You can claim VAT relief if you:
- are an individual with a disability (including dyslexia as above);
- are buying a product that has been designed solely for people with disabilities;
- and it is for your personal or domestic use.
“Designed solely for people with disabilities” does not mean that it can only ever be used by somebody who has a disability. But it does mean that the manufacturer’s intention in designing the product was purely to meet the needs of disabled people. We consider that some products, of those that we sell, meet this condition and so can be sold without VAT to an individual or charity under the conditions outlined above. These products have been agreed with our or the manufacturer’s or publisher’s local VAT office. See Para 4.5 in VAT Notice 701/7/02 Reliefs for Disabled People.
“Personal or domestic use” excludes normal commercial use, but includes, for example, computers supplied under the Access to Work scheme for the personal use of the disabled person.
Diagnostic products (e.g. those from Lucid Research and Dyscalculium) can also sometimes be zero-rated under different rules. This will typically be a Health Care organisation, local Dyslexia Association or other charity which has “as its sole purpose and function the provision of a range of services for, or on behalf of … disabled people”. (See VAT Notice 701/6Charity Funded Equipment, for who is eligible) If you are an eligible body and the product is being bought by you or donated to you and you fill in the relevant form (Certificate F, which is in PDF format) as “a charitable institution providing care or medical or surgical treatment for handicapped persons”, then we can supply the diagnostic product zero rated. There is a full Checklist (in VAT Notice 701/6) which, although designed for suppliers, should have enough information on purchasers to help you judge whether or not you qualify.
Training can also qualify for VAT relief but only when it is ordered in connection with a computer system or software that is also zero rated.
A central processor may be zero-rated if:
- it is sold as part of a computer system; and
- it has software installed that enables a disabled person to use the computer system or other software effectively, or to carry out tasks effectively when otherwise they could not.
So, where we supply a computer with VAT-free software to help with dyslexia (e.g. dictation software, Texthelp Read & Write, Kurzweil 3000) pre-installed, we can also supply the CPU (Central Processing Unit) VAT-free on which to run the software. This includes any hardware which is supplied as standard with that model, including:
- keyboard and mouse;
- integral screen, e.g. on notebook computers and iMacs.
In addition the following will then also be free of VAT:
- training and installation of the software;
- software-support fees;
- any future maintenance payments for the VAT-free items.
The following items cannot be supplied VAT-free:
- monitors for desktop PCs;
- hardware upgrades external to the standard system box, such as better speakers;
- computers where there is no enabling software, even if there is specialist hardware (e.g. a special keyboard).
Note: HMRC has now made its own internal guidance on VAT & disabilities available under the FOI Act.