Ordering for medical research

The uBASE system is used to purchase goods and services. Access to uBASE is restricted by profile to authorised users who have been trained to use the system. The profile required to process a purchase requisition and create the purchase order is ‘Orderer’.

Every purchase order created must have a VAT code. This code is referred to as a Tax Code in uBASE and is used by the Tax section each quarter to produce the VAT return which is submitted to HM Revenue and Customs (HMRC). The VAT code also helps the tax team to understand where VAT costs are being incurred across the University so that we can target our efforts in minimising these costs.

The University, as a charity, is entitled to claim relief from VAT on certain purchases of goods and, to a far lesser extent, services to be used in medical and veterinary research.

Two forms of VAT relief are available:

  • zero-rating of medical equipment
    • explanation of ‘qualifying goods and services’
    • definition of what is equipment
    • claiming the VAT relief
  • drugs and chemicals
    • definition of what is a substance
    • definition of what is a medicinal product
    • claiming the VAT relief

Zero-rating of medical equipment

This relief is quite wide-ranging but you should not assume that it applies to everything which you buy for the purposes of medical research.  VAT relief is only available if your medical equipment purchase meets ALL of these criteria:

  1. The goods or services must be purchased by the University for the University (i.e. we cannot be purchasing the goods for resale to a third party)
  2. The purchase must be of ‘qualifying goods or services’ (see below for a definition)
  3. The equipment being purchased must be used by the University for medical or veterinary research, training, diagnosis or treatment
  4. The University must provide the supplier with a certificate of eligibility for relief

On-line purchases

With more opportunity to buy directly on line from vendors it is essential that we obtain VAT relief when it is possible. The vast majority of vendors will have the facility for Orderers to be able to tick a box or similarly certify in some manner that VAT relief applies.

Getting it right first time

There are two good reasons to get the Tax Code correct on such orders. The first is that when used correctly it saves the University the VAT on the purchase. The second is that HMRC can charge a 30% penalty on top of the incorrectly certified VAT that should have been charged if we do make mistakes.

Explanation of ‘qualifying goods and services’

The legislation lists the following seven types of equipment as qualifying for relief provided that the other criteria above are also satisfied:

  • medical equipment – this covers articles specifically designed for a medical or dental purpose ranging from bandages and tongue depressors to complex machinery such as x-ray machines and scanners
  • scientific equipment – meaning equipment used for observation, experimentation and measurement
  • computer equipment – this covers basic hardware as well as peripherals such as monitors, printers and scanners
  • video equipment – this covers cameras, VCRs and DVD players and similar articles
  • sterilising equipment – for example, autoclaves
  • laboratory equipment – articles specifically designed for use in a laboratory such as lab benches, fume cupboards, Bunsen burners.  It does not cover the complete furnishing of laboratories
  • refrigeration equipment – for example fridges and ice-making machines

The VAT relief also includes:

  • parts and accessories for use in, or with, any of the above purchases
  • repair, maintenance or installation of qualifying goods, and any goods supplied in connection with this repair, maintenance or installation

What is equipment?

Equipment is described as ‘articles designed or used for a specific purpose’. It will usually be durable, although certain disposable items, such as syringes that are designed to be used once only, may still be equipment.

The following items are not equipment and do not qualify for zero-rating:

  • bulk materials such as liquids, powders, sheets, pellets, granules
  • clothing (other than specialist medical equipment such as surgical masks, gowns and gloves)
  • consumables such as chemical reagents, fuel, ink, medicines, oil, paper, and cleaning and sterilising fluids

However, medicines and chemical reagents may qualify for VAT relief as ‘Drugs and Chemicals’, described below.

Claiming the relief

Suppliers can only exempt these supplies from VAT if they have a declaration from the University that we are entitled to claim VAT relief.

The Tax Code M1 should be used on a purchase order sent to a UK vendor for claiming VAT relief for purchases used in medical research. When the Tax Code M1 is used on a purchase order a declaration is printed as part of the purchase order. The declaration states that the purchase is for use in medical research and therefore VAT relief is claimed. Tax Code R1 should be used a purchase order sent to an EU vendor for claiming VAT relief for purchases used in medical research. When the Tax Code R1 is used on a purchase order a declaration is printed as part of the purchase order, whilst the EU vendor does not require the declaration it demonstrates the University is making a conscious decision not to apply UK VAT to the purchase as it is being used in medical research.

Some suppliers insist on a more explicit certificate. You can download a template; ‘VAT exemption for medical research equipment certificate’ from the A-Z of useful forms and codes. You will need to complete the certificate with supplier details, print a copy of your departmental headed paper and send it to your supplier. You will also need to send a copy of this certificate to suppliers for purchases where the purchases order is not physically sent to the supplier, eg on-line purchases.

Drugs and chemicals

The University is able to claim VAT relief on both drugs and chemicals used in medical research under these criteria:

  • a charity engaged in medical or veterinary research can purchase ‘substances’ directly used for synthesis or for testing in the course of that research
  • a charity engaged in the treatment or care of people or animals, or in medical or veterinary research, can purchase ‘medicinal’ products

What is a substance?

A ‘substance’ can be natural or artificial, and can be in solid or liquid form or in the form of a gas or vapour. If the substance is purchased in the form of gas the zero-rating will also apply to the cylinder rental.

What is a medicinal product?

A ‘medicinal product’ is a substance presented as a medicine, or an ingredient for a medicine, capable of being administered to people or animals for a medicinal purpose. The zero rate covers medicinal products purchased by a charity for the purpose of testing the efficiency of those products.

‘Medicinal purpose’ means:

  • treating or preventing disease
  • diagnosing disease, or ascertaining the existence or degree of a physiological condition
  • contraception
  • inducing anaesthesia
  • otherwise preventing or interfering with the normal operation of a physiological function, whether permanently or temporarily, and whether by terminating, reducing or postponing, or increasing or accelerating the operation of that function, or in any other way

Claiming the relief on substances and medicinal products

Suppliers can only exempt these supplies from VAT if they have a declaration from the University that we are entitled to claim VAT relief.

The Tax Code M1 should be used on a purchase order sent to a UK vendor for claiming VAT relief for purchases used in medical research. When the Tax Code M1 is used on a purchase order a declaration is printed as part of the purchase order. The declaration states that the purchase is for use in medical research and therefore VAT relief is claimed. Tax Code R1 should be used a purchase order sent to an EU vendor for claiming VAT relief for purchases used in medical research. When the Tax Code R1 is used on a purchase order a declaration is printed as part of the purchase order, whilst the EU vendor does not require the declaration it demonstrates the University is making a conscious decision not to apply UK VAT to the purchase as it is being used in medical research.

Some suppliers insist on a more explicit certificate. You can download a template; ‘VAT exemption for medical drugs and chemicals certificate’ from the A-Z of useful forms and codes. You will need to complete the certificate with supplier details, print a copy of your departmental headed paper and send it to your supplier. You will also need to send a copy of this certificate to suppliers for purchases where the purchases order is not physically sent to the supplier, eg on-line purchases.

 

Need help or more information?

Who to contact
If you need advice or guidance on which VAT code to use for purchasing goods and services from UK suppliers then contact the Tax section before making your purchase.