Update on VAT and covid-19

1. VAT treatment of grants and furlough payments

The following income from the UK government or Local Authority is “outside the scope” of VAT, coded as “No VAT” for accounting purposes, not to be declared in box 6 (net sales) of the VAT return.  The grant income and financial support does not create any “non-business” activity by the recipient, and does not restrict the recipients ability to recover VAT on costs.

• Self-employed income support scheme (SEISS)
• Small Business Grant Fund
• Local Authority Discretionary Grant Fund
• Coronavirus Job Retention Scheme (for furloughed employees)

2. Zero rated PPE

A temporary zero rate for sales of Personal Protective Equipment (PPE) in the UK and their import was introduced in the UK from 1 May to 31 July.  The products include;

• disposable gloves
• disposable plastic aprons
• disposable fluid-resistant coveralls or gowns
• surgical masks – including fluid-resistant IIR surgical masks
• filtering face piece respirators
• eye and face protection – including single or reusable full face visors or goggles. Basic face masks are not covered by the zero rate.

It is possible that HMRC will extend this zero rate beyond the end of July.

If you have any questions, please contact the VAT team.