Accounting for VAT in Clinical Supplies

London, 10/01/10 . The issue of VAT often presents itself as a stumbling block when budgeting for clinical supplies.  Most contract manufacturers are required to charge VAT on all clinical supplies even if the medication is intended for non-commercial/academic trials. HM Revenue and Customs has issued several guidance notes about medical services and exemption from VAT.  We have summarised the key points from these guidance notes:

  1. HMRC Guidance Notice 701/57: This includes information about exemption from VAT in relation to clinical research but only explains when the health professionals should and should not charge VAT for their services.  Clinical research undertaken by health professionals is exempt from VAT only if it involves patient care, e.g. to monitor a patient involved in the trial for adverse reactions which may be detrimental to their health. If involvement with the patient is restricted to monitoring side-effects for analytical purposes, or to provide analytical testing services with no patient contact, this service is standard-rated.
  2. As a general guideline, the VAT status of a clinical trial medication is dependent on how the trial is funded.  Only if a trial is funded by a charity and fulfils the criteria of Notice 701/6 or Notice 701/1 (Part 6) can the supply of trial medication be zero-rated. In these cases the supplier requires a valid exemption certificate.
  3. If a trial is funded by any other means (e.g. research grant) then VAT at the standard rate (currently 20%) is applicable on all supplies.
  4. It is not possible for investigators to reclaim any VAT from HMRC.  To be able to do so, they would have to be VAT registered and to become registered they would need to qualify with regards to making taxable supplies.

In sum, when in doubt and until a supplier has agreed to zero-rating a supply subject to their acceptance of the exemption certificate, investigators should always budget for VAT being applicable on clinical supplies including the trial medication.