Differences between Exempt and Zero-Rated Supplies

Despite the fact that both of these categories result in no VAT being applied to the supply, the outcomes are very different.

Zero rating is a zero percent VAT rate, which means it is a taxable supply. As a result, any supplier of zero-rated goods or services is required to register for VAT. VAT registration has the advantage of allowing VAT to be recovered on expenses.

A business that only makes exempt supplies, on the other hand, is not making taxable supply and hence cannot register for VAT. As a result, any VAT paid on purchases becomes an additional, non-recoverable cost.

When a supply has the option of being zero-rated or Vat exempt, zero-rating takes precedence.

Charities and VAT

Charities are non-profit distributing entities created to promote education, religion, alleviate poverty, sickness, or infirmity, or carry out other community-beneficial activities.

Charities are not exempt from the VAT system in any way. Only VAT-registered charities are eligible to recoup the VAT they have been charged, and the amount they can return is limited.

The University of Strathclyde is a Scottish charitable organisation with the registration number SC015263.

Under Group 6 (Education) of Schedule 9 of the VAT Act 1994, the University is a "eligible body" for VAT purposes. The University's educational, research, and vocational training supplies are VAT-free as a result of its "eligibility."

The University pays VAT on the majority of the goods and services it receives, but due to partial exemption recovery regulations, it can only recover a small portion of the VAT.

While charities are not exempt from the VAT system in general, certain supplies made to charities are specifically exempt.

These items include:

• Some advertising services are available
• Certain sound recording equipment is provided to organisations that help the blind.
• Some types of maritime rescue equipment
• Donated items for sale or export that have been donated to charities
• Some types of construction services
• Certain medical and scientific supplies that have been donated

This is not an exhaustive list.

Charities and advertising are exempt from VAT.

The University qualifies for zero-rating as a registered charity if the advertisement is delivered by a third party. The relief applies to all sorts of advertisements, including job postings, on any subject. Charities are expected to only run ads that are in line with their charity goals.

VAT-free advertising is available to charities in any medium that connects with the public. All traditional advertising media, such as television, cinema, billboards, car sides, newspapers, and printed publications, are included. The most crucial consideration is whether the advertisement is displayed on someone else's time or in someone else's area. If this isn't the case, there won't be any room for zero-rating.

Direct mail and telemarketing do not qualify for relief since they are marketing and advertising directed at specific individuals or groups rather than a supply of advertising time or space.

A zero-rating advertisement is one that is posted on a third-website. party's

To acquire this relief, the University must submit a statement stating that the specified conditions for the claimed relief have been met and send it along with the order to the supplier.

Here is a link to a downloaded version of the zero-rating certificate. Publicity for Charities

Donated medical and scientific equipment get a zero rating.

At zero cost, a charity engaged in medical or veterinary research can purchase chemicals for testing or combination with other substances in the course of such research.

A'substance' can be natural or artificial, solid, liquid, gaseous, or vapourous. The zero-rating will also apply to the cylinder rental if the material is acquired in the form of gas.

A charity that is involved in the treatment or care of people or animals, as well as medical or veterinary research, is eligible to purchase pharmaceutical products at no cost.

A therapeutic product' is a substance that can be provided to people or animals for medicinal purposes and is offered as a medicine or an ingredient for a medicine. The zero rate applies to medicinal products acquired by a charity for the purpose of evaluating their efficacy.

Goods or services that qualify include:

• Medical equipment is defined as any piece of equipment with features or qualities that indicate it was created for a medical (including dental) purpose or function, such as patient diagnosis or treatment. Bandages, x-ray machines, and scanners are just a few examples.
• Scientific equipment is equipment that is used for scientific purposes. This comprises thermometers, weighing machines, and spectrometers, as well as precise measurement and analytical equipment.
• Computer gear, such as servers, screens, keyboards, and disc drives, as well as specific applications. Computer equipment is machinery or other equipment that is either operated by a computer or has computerised components.
• Video recording and playback equipment is included in the video equipment.
• Equipment for sterilisation, such as autoclaves and other specialised equipment that uses steam or other high-temperature procedures
• Bunsen burners; fume cupboards; microtomes; cryostats; laboratory benches; specialised sinks and catchpots; laboratory equipment - including equipment designed for use in a laboratory, such as test tubes and other laboratory glassware; Bunsen burners; fume cupboards; microtomes; cryostats; laboratory benches; specialised sinks and catchpots

Refrigeration equipment includes any cooling and freezing equipment, whether it's for industrial, home, or commercial use.

The following link contains more examples of goods and services that may be eligible for VAT relief:

Medical Research and VAT Relief (Exemption)

The zero-rating certificate is available in a downloaded format. This form can be filled out and sent to the supplier for relief. Medical Science - Instrumentation

The overarching condition for the above types of equipment is that it can only be zero-rated if it's bought or rented primarily for medical or veterinary research, training, diagnosis, or treatment.

If you have any questions regarding whether you qualify for zero-rating, please contact Finance.