Zero-rating for use by handicapped persons

If you or one of your clients are making taxable supplies in the UK, it is fundamental to establish the correct VAT treatment of those supplies at the earliest opportunity to ensure that this does not cause complications with HMRC further down the line.

 

This was the basis of the case heard by the First-Tier Tribunal, where Iansyst Limited appealed against HMRC’s decision that supplies of mobile phones and tablets with a particular software package pre-installed did not qualify for zero-rating for VAT purposes.The taxpayer in this instance argued that the programme installed on these devices, “Capturatalk” should qualify for zero-rating under Schedule 8, Group 12 of the VATA 1994 Act due to the programme being designed for use solely by handicapped persons. The programme had multiple uses including being able to write text from speech when dictated to, reading text aloud aswell as containing a link to a dictionary.

 

HMRC had initially stated that the product did not qualify for the zero-rate of VAT on the grounds that the equipment must be viewed as a whole, and while the Capturatalk enabled devices to be used in a certain way, this did not turn the device in something to be used “solely for use by handicapped persons”.  However, on evaluating the cases put forward by both HMRC and the taxpayer, the First Tier Tribunal considered that although the installation of the software would be in some way useful to non-handicapped persons, it substantially altered the use of the electronic device by way of allowing the user to listen to the content of webpages as opposed to reading them. Therefore, due to the package allowing handicapped persons to use the device differently from the way in which a non-handicapped person would use it, aswell as more effectively, the tribunal ruled that supplies of the software were eligible for the zero-rate of VAT.

 

To confirm the VAT liability of supplies being made by your business, call our free VAT helpline for expert advice.

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