I have a clients who sells wigs and related products. Her client base is solely made up of people with illnesses such as alopecia so she can zero rate all of the wigs. Can anyone tell me if the other products she sells to these clients are VATable and services she provides, such as colouring and styling wigs?
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Zero rating (presumably under Group 12) depends on the nature of the goods sold, and the fact that the customer is a 'handicapped person.'
Where goods are generally available to any persons, they will be standard rated, unless provided for elsewhere in the VAT Act 1994.
No idea what a "styling" wig is but the guidance refers to wigs (and not 'and related products') so I'd certainly check with HMRC. Doubt 'colouring' would qualify.
https://www.gov.uk/government/publications/vat-notice-7017-vat-reliefs-f...
Thanks. I've looked through all of the available information and it appears that it is just the wigs that are VAT exempt.
I know they aren't. Wigs in general aren't exempt but you can zero rate them to customers who qualify.
The point is, they're not exempt, they're zero-rated.
Exempt - no input tax recovery
Zero rated - full input tax recovery
I do understand basic VAT principles.
So why did you say "it appears that it is just the wigs that are VAT exempt"?
The problem is that there also always seems to someone that claims to know what they're talking about when the evidence points the other way. Confusing exemption with zero-rating is a common, and often serious, mistake.
Apologies if you think that I was being condescending - I wasn't thinking about what I was writing.
Please don't make assumptions about a stranger based on a snippet of text you have read. I am an experienced accountant with years of experience and I am very good at my job. This was a rushed question for a new client who specialises in an area in which I have no experience. I do wonder why you would comment on the post when you had no advice on the question which was asked. Thank you for your input - let's end the conversation now.
I am very good at my job.
Oh, I see, I didn't realise. Sorry for doubting your abilities.
I think it depends on the purpose of the other products and services. If these are incidental or ancillary to the supply of the wigs they would have the same VAT status as the main supply. I imagine a wig would normally be supplied coloured and styled, probably to match the wearer's natural or previous colour. No one would expect an alopecia sufferer to have to put up with an uncut, unstyled wig in the colour the hair just happens to come in. So I would expect initial colouring and styling to be zero rated even if itemised separately on the invoice.
Section 5 of VAT Notice 701/7 makes it clear thar repairs and maintenance of zero rated medical appliances such as wigs would be zero rated. Therefore a recolour because the original colour has oxidised in the sun would be covered, or repair/restyling needed because of wear and tear beyond what can be fixed with normal haircare. There is also a suggestion that something which amounts to a regular maintenance contract could also be zero rated.
But if someone wanted a restyle or a new colour for vanity reasons, such as to look good for a special event or a style change - the sort of change that most of us would go to a hairstylist or barber for - I would expect that to be standard rated. Similarly if someone not suffering from alopecia brought in a wig for colouring or restyling that would also be standard rated.
I must emphasise that the above examples are just my interpretation of the VAT principles. Notice 701/7 also makes it clear that the manufacturer or supplier is the expert when making these decisions, but should keep notes/documentation to support them if asked for justification by HMRC.