QE Tax Flash: Fat Jabs - zero fat and zero VAT?

A battle is brewing over the VAT classification of weight-loss drugs, or GLP-1 medications. Many of these medicines are zero-rated for VAT when dispensed by a doctor or pharmacist, but standard rated when purchased without a prescription. But the explosive growth of private prescribing, employer-funded programmes and subscription services is generating new VAT classification questions: when does a weight loss product become a medical treatment, and who bears the VAT consequences when that line is crossed?

Liesl Fichardt: “The risk for pharmaceutical companies is that these issues become a protracted uncertainty, with VAT liabilities accumulating in the background. The courts may become the final arbiter of these decisions, and it is important to engage proactively to protect the taxpayer’s position.”

Emily Au: “The complexity of VAT classification in the UK means that novel products and commercial models often clash with the law. The UK government’s commitment to supporting the life sciences industry may steer the tone and force of HMRC’s future enforcement strategy in this space.”

Julius Konstantin Berling: “The VAT treatment of weight-loss drugs is a dispute waiting to happen. There is a growing grey zone between medical treatment and consumer product in the area. HMRC will have quite the appetite for VAT and no intention of losing it.”