VATHLT6020 - The zero rate for dispensed drugs: background: scope and coverage

The Value Added Tax (Drugs and Medicines) Order 2014 which came into force on 21 May 2014, varied Group 12 Schedule 8 (zero-rated supplies of drugs, medicines, and aids for the handicapped). It modified and clarified the scope of Group 12 by applying the zero-rate to the supply of qualifying goods prescribed by health professionals who in addition to doctors and dentists are now permitted to prescribe medicines that are only available on prescription. These health professionals are termed in the law 鈥榓ppropriate practitioners鈥� In addition, the Order allows doctors to dispense drugs under certain circumstances described as 鈥榬elevant provisions鈥� The 鈥� appropriate practitioners鈥� and 鈥榬elevant provisions鈥� are listed in full in Sections 3.2.2 and 3.2.3 of

Accordingly, there are 5 conditions which must be met before a supply of goods on prescription can be zero-rated:

  • The goods must be prescribed by an appropriate 鈥榬elevant practitioner鈥�
  • The supply must be of 鈥榪ualifying goods鈥�
  • The goods must be dispensed for an individual鈥檚 personal use
  • The goods must not be supplied for use for patients while in hospital or in a similar institution or administered, injected or applied by health professionals to their patients in the course of medical treatment.
  • The goods must be dispensed by a registered pharmacist or under a requirement or authorisation under a 鈥榬elevant provision鈥橢ach of these conditions is examined in further detail below.

The Value Added Tax (Drugs and Medicines) Order 2020 comes into force on 1 April 2020. It extended the scope of Group 12 by applying the zero rate to prescriptions issued by a European Economic Area (EEA) health professional. A full list of EEA countries appears on the gov.uk website at /eu-eea

鈥淓EA health professional鈥� is defined in regulation 213 of the Human Medicines Regulations 2012 and covers a qualified prescriber in a country in the EEA or Switzerland. However, there will be further changes with effect from the end of the transitional period following the UK鈥檚 departure from the European Union.