VAT

2. What is VAT Charged On?

For VAT purposes, goods and services are divided into three categories.

2.1 Most goods and services fall into the category 'standard-rated supplies'. Almost all sales of goods and services are standard-rated, with a few exceptions which are taxed at five per cent, or others which are zero-rated (see 2.3). If you make taxable supplies, you can register for VAT.

• Once registered, you charge your customers VAT.
• You also claim back VAT on the goods and services your own business purchases, other than business entertaining.

2.2 The 'exempt supplies' category mainly includes services such as finance.

• If you only make exempt supplies, you cannot register for VAT. You cannot claim back VAT paid on purchases directly attributable to these exempt supplies.

2.3 The 'zero-rated supplies' group includes necessities, like food and children's clothing. If you make zero-rated supplies you can register for VAT.

• You do not charge customers VAT on sales. But you can claim back VAT on your business purchases, if you are registered.