Free clinical-trial medicines face later mandatory zero rate

Investigational medicinal products and non-investigational medicinal products supplied for use in a clinical trial authorised by the Medicines and Healthcare products Regulatory Agency (MHRA) are zero-rated for VAT. The trial does not have to be funded or supported by the NHS, and it does not have to take place in an NHS hospital. Supplies made before 23 June 2026 could be treated as samples, which had the same practical effect: input tax recoverable and no output tax due.

From 23 June 2026 until Royal Assent to the Finance Act 2027, suppliers have a choice: they can continue to treat these supplies as samples, or they can apply the zero rateGOV. Either way the same amount of input tax is recoverable and no output tax is due. The end of that choice window has moved back: it previously ran to 28 October 2026GOV. From Royal Assent to the Finance Act 2027 the supplies must be zero-ratedGOV, with input tax recovery continuing as though the products were treated as samples and no output tax accounted for.

After a trial has ended, the same product supplied free of charge for the continued treatment of a patient who received it during the trial can also be zero-rated. Where the NHS provides the treatment, or the treatment is commissioned or funded by the NHS, the supply may qualify under either of two items; otherwise it qualifies only as continued treatment of a trial participant, and the product must be the same one the patient received during the trial. A medicine supplied free of charge outside a clinical trial stays standard-rated unless it goes to an NHS body or to NHS-commissioned or NHS-funded treatment, or to such a continuing patient, with an exception for a supply to an intermediary who passes it on for a qualifying use.

Every zero-rated supply or import needs a valid certificate issued by the customer before the supply, confirming the qualifying use — but the certificate alone does not make a supply zero-rated, and all other conditions must still be met. A supplier must take all reasonable steps to check the certificate and keep evidence of the checks. An incorrect certificate can cost a penalty equal to the VAT not charged, unless the issuer has a reasonable excuse. Imports for qualifying uses can be zero-rated where the importer holds the certificate and enters the relevant zero-rated VAT codes in the Customs Declaration Service. A supplier that accounted for VAT at the standard rate on supplies made between 23 June 2026 and 27 October 2026 that now qualify for zero rating can correct the charge. If medicine received at the zero rate is put to any other use or disposed of unused, the recipient must tell the supplier the certificate is no longer valid and the supplier must account for output tax on the deemed supply.

The rules sit in Schedule 8, Group 12, Items 1ZA to 1ZC of the VAT Act 1994, with penalties for incorrect certificates under section 62 of that Act.