The latest Coronavirus mutation has now arrived, with two travellers from South Africa testing positive for the new Omicron variant. The Government’s knee-jerk reaction was to reimpose the ‘red-list’ for around a dozen countries in Africa and if you are travelling from anywhere else you must now take a PCR test.
PCR v LFT, what is the difference?
There are two types of covid tests, the Polymerase Chain Reaction (PCR) test, which is sent away to a lab to diagnose if you have the disease, and the Lateral Flow test (LFT) which can diagnose Covid-19 on the spot.
Until last Friday you only had to take a LFT on your return from holiday, but as they are not quite as accurate as PCR tests, you will now have to take a PCR test. The test for each is performed the same way with a throat/nasal swab, but the big difference is in cost, with a PCR test costing around three times that of a LFT test.
It gets worse!
On top of the extra cost, even triple jabbed travellers will have to self-isolate until they get the results of their test, plus a further ten days if it’s positive. Plus, and to rub salt in the wound, The Guardian has revealed that most companies are not charging VAT on Covid testing kits for travellers, on the basis that these testing kits are VAT exempt as medical services.
Are covid tests vatable?
The starting point with a supply of goods or services made in the UK is that you charge 20% VAT if you are registered for VAT. The ‘get out of jail card’ to avoid charging VAT at 20% is if the supply in question is either exempt from VAT or zero-rated.
Empirical commonsense would suggest that it’s a no-brainer that covid tests should be exempt from VAT as a ‘supply of medical services’, but what do the VAT rules say?
Are Covid Tests VAT Exempt?: The VAT Test
The rules state that three conditions must be met for exemption of a medical service from VAT:
The service is intended to protect, maintain or retore the health of the patient: No problem with this one, as it’s clearly for the health of the patient.
- It is carried out either by or under the supervision of a qualified medical professional. Now we hit a bit of a problem, as it would probably be a waste of a doctor’s time to just look at the equipment after a Covid test and record the result, as it’s only a case of looking at whether the line has produced a negative or positive result. However, the legislation goes further – the service can also be exempt from VAT if it is performed under the supervision of a medical professional. So, a bit of wriggle room there.
- The work relates to the skills of the person in question. Unfortunately, most tests are undertaken by the patient and unsupervised, so unless you’re a medical professional, you fail part 3.
Are Covid Tests VAT Exempt?: Where do we go now?
A single word in the VAT rules makes all the difference. If conditions for exemption included the word ‘or’ instead of ‘and’, we wouldn’t have a problem. Unfortunately, with the medical services exemption, all of conditions 1, 2 and 3 above need to be met.
So, unless Rishi Sunak can be persuaded to change ‘and’ for ‘or’ Covid tests will, unfortunately, be subject to VAT unless you have the test in a clinic.
Tax Accountant’s view
It is clear from the industry reaction that most of the leading companies in the field have thus far not charged 20% VAT on the basis that the testing kit itself is exempt from VAT, so I fully expect a legal challenge on this one very soon on the basis that the two parts of VAT legislation effectively contradict each other.