Page 27 - P4304.1-V116 PS Mag December 3_Neat

What this means is that the VAT for the item that is administered cannot
be recovered.

1. Drugs and medicines supplied on prescription to a patient can be zero-
rated if statutory conditions are met (VAT Notice 701/57). Zero-rated
is still a taxable rate of 0%—so input VAT is normally recoverable for
that activity. (https://www.gov.uk/guidance/health-professionals-
pharmaceutical-products-and-vat-notice-70157)

This means that the VAT can be claimed back.

Implications for PAIs:

• If the item is administered by the practice, it’s typically part of an
exempt medical service (no output VAT; related input VAT normally not
recoverable, subject to partial-exemption de minimis).
• De minimis means the small amount of input VAT that a VAT-registered
business can still reclaim even though it relates to exempt activities —
if the total exempt-related VAT is below HMRC’s limit (currently about
£7,500 per year and less than 50% of total input VAT).This is where your
accountant earns his dollar!

• If the item is dispensed for the patient to take away on prescription
(even if it has a PADM flag), it’s a zero-rated supply of a medicinal
product (no output VAT charged, but input VAT generally recoverable
because it’s linked to a taxable (0%) activity).
Pitfalls to avoid

• Assuming PADM = Personally administered in practice. It doesn’t.
VAT classification follows what actually happened (administered vs
dispensed).
• Treating personally administered items as zero-rated just because you
bought them from a wholesaler as “medicines”. If you administer them,
the patient receives a single exempt medical supply.
Bottom line for finance leads
• Administered in practice? Treat as exempt medical care (input VAT
generally not recoverable; include in partial-exemption).
• Dispensed to the patient on prescription? Treat as zero-rated goods
(input VAT recoverable in the normal way). Do not report to accounts as
non-recoverable.
• PADM flag? Not to be used for VAT decisions.
Hope that helps!

VAT and PAI’s | PS Magazine 27

18/11/2025 11:41:51
P4304.1-V116 PS Mag December.indd 27
P4304.1-V116 PS Mag December.indd 27 18/11/2025 11:41:51