Withdrawal of four Extra Statutory Concessions (ESC)

Following the Wilkinson case HMRC is reviewing all of its Extra Statutory Concessions (ESC) to determine whether they should be removed or incorporated into new legislation. HMRC published details of four ESCs which will be withdrawn as part of the review and gives notice of their withdrawal with effect from April 2018.

HMRC states that the withdrawal of concessions zero-rating of central processor and the composite rate of VAT for computer systems will have no impact on disabled groups. Both concessions are now obsolete due to advances in technology and the development of tablets and smart phones. The concession was not carried forward into current version of notice 701/7 and this has not apparently caused any problems. Eligible supplies of such systems can also be zero-rated under existing legislation.

CTG received no feedback expressing concerns about the withdrawal of these ESCs, which has now happened.

Zero-rating of central processor – Notice 701/7

The concession is contained in para 9.2 Notice 701/7 (August 2002 version) has not been carried forward in the latest VAT Notice 701/7. This concession allows a central processor to be zero-rated if sold as part of a computer system with software installed to enable a disabled person to use the computer system or other software effectively, or to carry out tasks effectively when otherwise they could not. This concession has caused some problems because of the use of the term ‘central processor’, which is considered to be outdated in view of technological advances, particularly in the development of tablets and smart phones. The concession allowed the VAT zero-rating of a central processor if it was sold as part of a system designed as a complete package to aid a disabled person to overcome communication problems through the installation of software. HMRC now considers that the items the ESC was intended to cover fall within existing legislation and the ESC will be withdrawn with effect from April 2018.

Composite rate of VAT for computer systems – Notice 701/7

The concession is contained in para 9.3 Notice 701/7 (August 2002 version) has not been carried forward in the latest VAT Notice 701/7. Traders supplying disabled people with complete computer systems that contain significant specialist items for use by the disabled may use a composite VAT rate for such supplies. This rate is based on supplies of such packages made by that supplier over a recent representative period. In addition to the items of equipment designed solely for the use of a disabled person, the suppliers may include the values of the central processor and costs charged to the customer for the installation of the equipment and for the training in its use. This concession was only intended to be used in conjunction with the ESC zero-rating of a central processor sold as part of a complete computer system package to aid a disabled person to overcome communication problems. HMRC considers this concession to be obsolete and it will be withdrawn with effect from April 2018. If any business would like to use a simplified calculation method in future then this can always be negotiated with HMRC.

Affiliation fees for sports clubs – Notice 701/45

The concession is published in paragraph 3.6.2 of VAT Notice 701/45 and can be found on the government website at: A sport’s governing body, or similar umbrella organisation, often charges an affiliation fee to individual clubs who make an onward charge to their members. Where the clubs are non-profit making, the supply of this affiliation fee to their individual members is exempt from VAT. However, if the club is a profit-making commercial club, then the supply to their individual member is standard rated. The concession seeks to put profit-making commercial clubs in a similar position to non-profit making clubs, in that they do not need to account for output tax on the fee charged. It achieves this by allowing profit-making commercial clubs to treat these re-charges to their members as though they were disbursements. However, as such re-charges of affiliation fees are not legally a disbursement the concession goes beyond HMRC’s discretion and it will be withdrawn with effect from April 2018. Withdrawal of the concession means that the onward charge of the affiliation fee will be liable to VAT unless it meets the conditions of a disbursement. The withdrawal of this concession has no impact on the VAT treatment of affiliation fees by non-profit making sports governing bodies, or similar umbrella organisations, and on non-profit making sports clubs to their members. In their case, the charge they make of affiliation fees continue to be exempt under the law.

HMRC is also proposing to remove C12 Retail co-operative societies: accounting periods