Revenue & Customs Brief 14 (2020) changes to the methods used by opticians and sellers of hearing aids to account for VAT on their supplies.
The brief covers simplifications to the processes used by opticians and dispensers of hearing aids to account for VAT on their supplies. The changes take effect from 1 October 2020.
VAT-registered opticians who dispense spectacles or contact lenses to their customers and VAT-registered sellers of hearing aids make two supplies for VAT purposes:
- A Supply of goods: the spectacles or lenses or hearing aids which are taxable at the standard rate.
- A Supply of services: dispensing services are exempt from VAT.
To account for VAT on the taxable element of their sales, opticians and hearing aid dispensers may either:
- Use separately disclosed charges for each supply, notifying each separate charge to the customer at the time of sale.
- Charge a single price to the customer and make a fair and reasonable apportionment of the income between the taxable and exempt elements of the supply, using a method of their choice, which must be approved by HMRC.
From 1 October 2020, the processes will be simplified.
- Businesses will be required only to hold a till slip or similar evidence to demonstrate that they are making two separate charges to the customer at the time of supply and that this information is being conveyed to the customer.
- Those using a method of apportionment will no longer have to seek prior approval from HMRC before operating a method. This will bring opticians and dispensers of hearing aids into line with other businesses that apportion VAT on their sales.
Useful guides on this topic
VAT: Supply of goods
VAT on goods is determined by the place of supply (POS); whether they are UK based supplies, imports, exports, EU dispatches, or EU acquisitions.
VAT: Supply of services
VAT on services is determined whether the supply is within the scope of UK VAT and whether VAT is payable on that supply.
Partial exemption & input VAT
How do you calculate the amount of input tax you can recover under the VAT partial exemption rules? What are the de minimis rules?
HMRC’s guidance manuals will be updated to reflect these changes from 1 October 2020.