The UK government has announced a temporary VAT zero-rating for all Personal Protective Equipment (PPE).
VAT zero-rating means that the items sold are still subject to VAT, but that the VAT rate is zero per cent.
If you sell PPE, your VAT invoice would now look something like this (please note that these are invented prices):
5 x FFP3 respirators — £39.99
VAT 0% — £0.00
You still need to issue a VAT invoice for the purchase as with any other VAT-applicable transaction.
The zero-rating went into effect on 1 May and will stay in place until 31 July (or the end of the first VAT quarter for stagger group 2).
The reason for this zero rate is to alleviate the burden of VAT for such protective equipment from people and companies that are not able to reclaim their VAT.
If you are an online store selling these goods, you will need to update your product inventory to set the VAT to zero per cent.
Please note that you must not set the inventory item to “VAT Exempt” or “Out of Scope”, but rather set the VAT percentage to zero.
What counts as COVID-19 Personal Protective Equipment?
The zero-rate only applies to PPE which follows “Public Health England’s coronavirus (COVID-19) PPE guidance on 24 April 2020″.
Items listed in that article include:
- Filtering facepiece class 3 (FFP3) respirators
- FFP2 respirators
- N95 respirators
- Any other respirator which complies with Health and Safety Executive recommendations
- Fluid resistant surgical masks
- Eye and face protection, specifically:
- “surgical mask with integrated visor”
- “full face shield or visor”
- “polycarbonate safety spectacles or equivalent”
- Disposable aprons and gowns
- Disposable gloves
The Chancellor’s continual efforts to prevent collapse
Since then he has put into effect unprecedented schemes and programs in an effort to keep the UK economy from collapsing, and to assist businesses and individuals.
On 20 March he announced the Coronavirus Job Retention Scheme which would pay up to 80 per cent of employees’ wages if they were put on furlough, up to a maximum of £2,500.
He deferred VAT payments for the next quarter until the end of the year.
He ensured that the Coronavirus Business Interruption Loan Scheme would be interest-free for a year.
When that same Coronavirus Business Interruption Loan Scheme (CBILS) came under fire for low loan-approval rates, he put into place the Bounce Back Loan Scheme (BBLS). The BBLS saw upwards of 100,000 small businesses applying for it on the very first day.
This latest effort of his is aimed at easing the pressure and costs, however small, for those on the frontlines defending the United Kingdom against the virus.
What else is zero-rated since COVID-19?
Rishi Sunak announced in his March Budget that e-publications would be zero-rated as of 1 December.
But on 30 April 2020, he said,
“We want to make it as easy as possible for people across the UK to get hold of the books they want whilst they are staying at home and saving lives.
“That is why we have fast tracked plans to scrap VAT on all e-publications, which will make it cheaper for publishers to sell their books, magazines and newspapers.”
So, this e-publication zero-rating is now already in effect. If your company sells any e-publications, you need to update your inventory items as above.
Markets surging, hope on the horizon
The FTSE climbed by 4.3 per cent on Monday, 18 May. Germany reported a recession, but “Frankfurt and Paris bounced by more than 5%” and crude oil is surging as well.
There is hope on the horizon as investors grow confident that the virus is finally getting under control.
As a business owner, it is difficult to understand if all the actions and decisions taken by governments worldwide were entirely correct. But there is no doubt that things are getting better now, and this matter of PPE being zero-rated is welcome news for those helping sincerely to keep this pandemic under control on our home soil.
Shoaib Aslam is the co-founder of Pearl Chartered Accountants, a UK-based chartered accountancy firm that has multiple locations across London. They are experts in helping startups and established businesses with all aspects of growth, strategy, scaling up, accounting and tax planning.