Our earlier article, Budget: nine key VAT changes announced, covered the headline VAT measures. Here, we look at seven additional measures and what they mean in practice.

Medical deputies and locums

From 1 May 2027, the government will remove the VAT exemption for supplying a deputy for a medical practitioner. The Finance Bill 2026–27 repeals Item 5, Group 7, Sch 9, Value Added Tax Act (VATA) 1994. Supplies of medical staff, including locum doctors supplied by employment businesses, will generally be subject to VAT at the standard rate. Medical care, including deputising services, provided by registered medical practitioners will remain exempt. The tax information and impact note has more detail.

The change follows the First-tier Tribunal decision in Isle of Wight NHS Trust v HMRC [2025] UKFTT 1114 (TC). After that decision, HMRC accepted that the existing exemption can apply to supplies of registered locum doctors, including those supplied by employment businesses. The budget measure restores HMRC’s previous intended policy position from May 2027.

Energy-saving materials and heat batteries

From 1 April 2027, the reduced rate of 5% will replace the temporary zero rate for installing qualifying energy-saving materials. The zero rate currently applies to qualifying installations in residential accommodation and in buildings used solely for a relevant charitable purpose.

The government will also add heat batteries to the relief through secondary legislation, so installing them in qualifying buildings will be eligible for the reduced rate from 1 April 2027.

The move from the zero rate to 5% was already provided for in existing legislation and is not a new budget announcement. The temporary zero rate, introduced in 2022, was always due to expire on 31 March 2027. VAT on energy-saving materials and heating equipment (VAT Notice 708/6) sets out the current rules.

Zero-rating donated medicines

A new VAT zero rate applies from 23 June 2026 to qualifying medicines supplied free of charge for NHS treatment, including treatment commissioned or funded by the NHS. This includes medicines supplied through early or managed access programmes, including the Early Access to Medicines Scheme. Suppliers must hold a certificate from the recipient confirming that the medicine will be used only for the qualifying purpose.

The zero rate also applies to medicines supplied free of charge for use in clinical trials, and to qualifying supplies for the continued treatment of patients who benefited from treatment during a clinical trial. Previously, giving medicines away could result in a deemed supply on which output VAT was due, even though no payment was received.

The measure gives effect to an announcement made on 23 June 2026 and applies retrospectively from that date, subject to enactment. While the legislation awaits Royal Assent, HMRC will not require businesses to account for output VAT on qualifying supplies made on or after that date. VAT Notice 1004 explains the conditions.

Distance sales to Northern Ireland

From 1 January 2027, the government will change the VAT rules for distance sales of goods from the EU to consumers in Northern Ireland, implementing elements of the EU’s VAT in the Digital Age reforms. The Finance Bill 2026–27 amends paragraph 48 and related provisions of Sch 9ZA, VATA 1994.

The change is narrow. The €10,000 (£8,818) distance selling threshold will count only supplies made from the supplier’s home territory, meaning the member state (or Northern Ireland) where it is established. Sales sent from stock held in another member state will no longer count towards the threshold. A business that exercised the option to treat the place of supply as the country of destination before 1 January 2027 will be treated as having exercised the equivalent option under the revised rules for two years from the date it did so. HMRC’s guidance on distance selling covers the current rules.

Call-off stock arrangements

The Finance Bill repeals the Northern Ireland call-off stock simplification from 1 July 2028, reflecting changes to EU VAT rules. The simplification can remove the need for a supplier to register for VAT where goods are moved cross-border and held as call-off stock for an identified customer. Goods removed before 1 July 2028 can continue to benefit until 30 June 2029.

VAT126 refund claims

The Finance Bill 2026-27 gives HMRC a power to make regulations on VAT refund claims made using form VAT126 by eligible bodies that are not registered for VAT, including local authorities, academies, specified museums and galleries and certain charities. The regulations can cover claims, assessments of amounts wrongly refunded, record keeping, penalties and appeals. The power takes effect on Royal Assent, with the detailed rules to follow in secondary legislation.

Deposit Return Scheme

New VAT accounting rules will apply to deposits charged under the deposit return schemes for drinks containers, which are due to start in autumn 2027. Consumers will pay a refundable deposit on qualifying single-use drinks containers and get it back when they return the container.

VAT will not be due on the deposit when the drink is sold. Instead, VAT will be due only on deposits that are not refunded because the container is not returned. The scheme administrator, rather than individual drinks producers or importers, will account for that VAT. This is intended to simplify VAT accounting for businesses in the supply chain. VAT provisions for Deposit Return Schemes has the detail.