VAT zero rate on donated medicines: the 2026 change

Medicines that pharmaceutical companies give away free for NHS patients, early access schemes and clinical trials are zero rated for VAT from 23 June 2026. HMRC confirmed the details on 28 October 2026, the day of Budget 2026, in Revenue and Customs Brief 12 (2026), a policy paper and a new VAT Notice 1004. The law has not yet passed, but HMRC is already applying the zero rate.

What has changed?

A new VAT zero rate now covers medicines supplied free of charge for qualifying uses. Before 23 June 2026, a free donation of goods was a “deemed supply” under Schedule 4 of the VAT Act 1994, so the donor had to account for 20% output VAT even though it received no payment.

HMRC’s policy paper says the aim is to protect patients’ access to new medicines provided free, so companies can donate them without a VAT cost. The government announced the change on 23 June 2026, which is why the zero rate starts on that date.

Which donations are zero rated?

HMRC’s VAT Notice 1004 lists four qualifying uses:

For NHS use, the product must have a marketing authorisation, be supplied under regulation 167 of the Human Medicines Regulations 2012, or be for the Early Access to Medicines Scheme. Medicines donated through an intermediary can also qualify, if the intermediary passes them on free for a qualifying use.

What is still standard rated?

A free medicine stays at 20% where it is not supplied to the NHS or an NHS-funded provider, and the patient did not previously receive it in a clinical trial. Products already exempt under Schedule 9, Group 7, such as therapeutic products derived from human blood, cannot be zero rated.

This measure is separate from the relief for business donations of goods to charities that began in April 2026. That relief has its own rules and limits; see Budget 2026 VAT changes.

Has the law been passed?

Not yet. HMRC’s Revenue and Customs Brief 12 (2026) says the zero rate applies from 23 June 2026 “subject to enactment”. Primary legislation will amend Group 12 of Schedule 8 to the VAT Act 1994, and section 62 of the same Act on incorrect certificates.

While the legislation awaits Royal Assent, HMRC will not require output VAT on supplies made on or after 23 June 2026 that meet the conditions. Deloitte’s weekly VAT update of 2 November 2026 notes that the Finance Bill “will be published in due course”. We could not find a published bill clause at the time of writing.

What certificates are needed?

The recipient must certify each qualifying supply. Notice 1004 sets out two certificates:

• Clinical trial certificate for medicines used in a trial
• Authorised supplies certificate for NHS use and post-trial treatment

The customer issues the certificate, not the donor, and it must confirm that the medicine is supplied for no payment and for a qualifying use. It should be in place before the supply. HMRC will let a donor adjust its VAT if a certificate arrives late, provided the customer can show it intended the qualifying use at the time.

Donors must take reasonable steps to check each certificate and keep evidence of those checks. A customer who gives an incorrect certificate can face a penalty equal to the VAT not charged.

What about clinical trials before the change?

HMRC lets companies treat trial medicines donated before 23 June 2026 as samples, so no output VAT is due on them. Notice 1004 says you may continue the samples treatment for trial supplies from 23 June to 27 October 2026, and should treat trial supplies as zero rated from 28 October 2026. Either way, input VAT on the related costs stays recoverable.

Can you reclaim VAT already paid?

Yes. If you accounted for output VAT on qualifying supplies made on or after 23 June 2026, HMRC will process error corrections, subject to its normal evidence rules. Under VAT Notice 700/45, net errors of up to £10,000, or up to £50,000 if within 1% of box 6 turnover, can be corrected on your next VAT return. Larger errors must be reported to HMRC separately. See how to complete a VAT return.

What does it cost the Exchequer?

The policy paper gives the costing from Table 6.1 of Budget 2026, certified by the Office for Budget Responsibility:

HMRC describes the administrative impact as negligible, with one-off familiarisation costs and ongoing costs for certificates.

What to do now

1. List free supplies since 23 June 2026 by use: NHS, early access, trial or post-trial.
2. Collect certificates from each recipient, using HMRC’s templates or your own with the same content.
3. Stop charging output VAT on qualifying supplies, and keep standard rating for the rest.
4. Correct earlier returns where you paid VAT on qualifying supplies from 23 June 2026.
5. Watch for the Finance Bill and check the final wording against Notice 1004.

For the wider VAT rate picture, see VAT rates and exemptions and our Budget 2026 coverage.

Frequently asked questions

When does the VAT zero rate on donated medicines start?

It applies to qualifying supplies made on or after 23 June 2026, subject to the legislation being enacted.

Who benefits from the zero rate?

Pharmaceutical companies that donate medicines for NHS treatment, early access schemes, clinical trials or continued treatment after a trial.

Do donors still recover input VAT?

Yes. Zero-rated supplies are taxable supplies, so input VAT on related costs remains recoverable.

Is a free medicine supplied privately outside a trial zero rated?

No. If it is not for the NHS or an NHS-funded provider, and the patient was not in a trial of that medicine, it stays at 20%.

Which HMRC notice explains the zero rate?

VAT Notice 1004, Zero rating medicines supplied free of charge, published on 28 October 2026.