HMRC has issued Revenue and Customs Brief 14 (2020) to announce simplifications to the processes used by opticians and dispensers of hearing aids to account for VAT on their supplies. The changes will take effect from 1 October 2020.

Opticians that dispense spectacles or contact lenses to their customers make two supplies for VAT purposes: the spectacles or lenses themselves, which are taxable at the standard rate, and a supply of dispensing services, which is exempt from VAT. Similarly, dispensers of hearing aids make a taxable supply of hearing aids and an exempt supply of dispensing services.

To account for VAT on the taxable element of their sales, opticians and hearing aid dispensers may either:

• use separately disclosed charges for each supply, notifying each separate charge to the customer at the time of sale; or
• charge a single price to the customer and make a fair and reasonable apportionment of the income between the taxable and exempt elements of the supply, using a method of their choice, which must be approved by HMRC.

From 1 October 2020, dispensing businesses will be required only to hold a till slip or similar evidence to demonstrate they are making two separate charges to the customer at the time of supply, and that this information is being conveyed to the customer. This change is to provide a uniform standard of evidence for businesses to demonstrate that they are making separately disclosed charges.

The second change is that those using a method of apportionment will no longer have to seek prior approval from HMRC before operating a method from 1 October 2020. This will bring opticians and dispensers of hearing aids into line with other businesses that apportion VAT on their sales.