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VAT
2. What is VAT Charged On?
For VAT purposes, goods and services are divided into four categories.
2.1 A large proportion of sales of goods and services are standard-rated (20 per cent). There are exceptions that are either exempt (see 2.2), zero-rated (see 2.3), or charged at 5 per cent, known as reduced-rated (see 2.4). If you make supplies that are not exempt, you can or may have to register for VAT (see 3).
- Once registered, a business charges VAT to their customers.
- Registered businesses can normally claim back VAT paid on business purchases.
2.2 Exempt supplies include finance; insurance; land and property (unless you opt for VAT to apply) and charitable fund-raising amongst others.
2.3 Zero-rated supplies include most food, children's clothing, construction of new houses, books, printed matter and prescription drugs.
- A business that makes only zero-rated supplies can register for VAT and reclaim VAT paid on purchases even though they do not charge their customers VAT.
2.4 Reduced-rated supplies include domestic fuel; residential conversions and certain refurbishments; installing energy-saving materials in residential accomodation; and children's car seats.
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