Finance Bill Tracking Service 2007 | Budget 2007 | Budget Notes

BN57 VAT: reduced rate for smoking cessation products

Who is likely to be affected?

1   Suppliers and consumers of smoking cessation products.

General description of the measure

2   A reduced Value Added Tax (VAT) rate of 5% for 'over the counter' sales of smoking cessation products will be introduced. The reduced rate will apply for one year and will take effect alongside the introduction of the ban on smoking in public places in England.

3   Smoking cessation products that are dispensed on a prescription remain zero rated.

Operative date

4   The Treasury Order will be introduced shortly. Subject to Parliamentary approval, it is expected that the reduced rate will have effect from 1 July 2007.

Current law and proposed revisions

5   Smoking cessation products dispensed by a pharmacist on the basis of a prescription of a medical practitioner are already zero-rated by the Value Added Tax (VAT) Act 1994. This measure will not affect smoking cessation products supplied in these circumstances.

6   The reduced rate applies to all other supplies of smoking cessation products by retailers including supplies made over the internet. This includes all non-prescribed sales of patches, gums, inhalators and other pharmaceutical products held out for sale for the primary purpose of helping people quit smoking.

7   A new Group will be added to Schedule 7A to the VAT Act 1994 by Treasury Order, to introduce the reduced rate.

Further advice

8   If you have any questions about this change, please contact the National Advice Service on 0845 010 9000.