Currently, women’s sanitary products are subject to VAT at the reduced rate (5%) under Group 4, Schedule 7A, 1994. This reflects Point (3), Annex III, EC Principal VAT Directive.
VAT is a tax governed by European law,which does not permit sanitary products to be zero-rated.
The government states that it will be making the case in the EU for a zero rate of VAT on sanitary products.
As it cannot zero rate these products immediately, the government will set up a new annual fund to support women’s charities.
It will be funded with £15 million, which is stated to be equivalent to the VAT raised each year on sanitary products, and the government will make an initial donation totalling £5 million to support The Eve Appeal, SafeLives, Women’s Aid and The Haven. Further donations and recipients will be announced at Budget 2016.
The fund will run over the course of this Parliament, or until the UK can apply a zero rate.