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Assistive Mobile Technology for the Disabled Zero-Rated for VAT

iphone In a case of interest to tax professionals and the technology industry, a tribunal has ruled that mobile phones and tablets which are pre-loaded with software designed to assist disabled people should be zero-rated for VAT purposes.

The software – which, amongst other things, enabled visually impaired and dyslexic people to write text from speech and to hear text read aloud when they accessed websites – was loaded onto standard mobile devices. They were marketed by a company which specialised in providing assistive technology to disabled people.

The company argued that devices installed with the software were ‘designed solely for use by a handicapped person’, within the meaning of the VAT Act 1994, and were thus exempt from VAT. HM Revenue and Customs, however, insisted that the nature of the devices was not fundamentally changed by the installation of the software and that they could still be used by non-disabled people.

In upholding the company’s arguments, the First-tier Tribunal ruled that the package of device and software had to be considered as a whole. The requirement for the devices to be ‘solely’ for the use of disabled people would be very difficult to meet if it meant that they had to be of no utility to non-disabled people. The pre-loaded software enabled disabled people to use mobile devices in a different way and the statutory test for zero-rating was therefore satisfied.