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VAT Rates

VAT can be mind-boggling at times, so we've put together a quick summary of the most common VAT rates and how they're applied.

Standard VAT Rate - 20%

This is the most common rate of VAT. Most taxable goods and services will levy a 20% rate of VAT. The Standard Rate has previously been pegged at 15% and 17.5%.

Reduced rate - 5%

The reduced rate of VAT applies predominantly to the sale of domestic energy and infrastructure for major construction work.

Zero rated

Zero rated items predictably carry no VAT. It's slightly different to VAT exempt in so far as they still form part of your total taxable sales or purchases, and the gross total must be reported on the VAT Return.

A large number of grocery products are zero rated, along with baby clothes and printed media such as newspapers, magazines and books (excluding e-books).

VAT Exempt

VAT Exempt sales often cover (amongst other things) educational services, medical care and health services provided by doctors, opticians, dentists and pharmacists. Some services supplied by Royal Mail are also VAT exempt, this is a very common type of cost for many businesses so it's always important to check your invoices in detail.

Outside the scope of VAT

Some items are completely outside the scope of UK VAT. These typically include supplies or purchases made outside of the European Union. There are also some more unusual cases such as congestion zone charging, toll road, bridge and tunnel charges, and also MOT testing services.

With the addition of the VAT MOSS rules that came into being on 1st January 2015, it is also required to levy VAT at the consumer's local VAT rate within their EC member state for certain digital services. This in effect would mean that the invoice is outside the scope of UK VAT.

EC Reverse Charge

When goods or services are supplied from a UK VAT registered entity to another VAT registered entity in a different EC member state, it is possible to remove the VAT element off the invoices. In reality the VAT isn't zero rated but added then reversed back off, hence the name "Reverse Charge".

You can find out more about the VAT reverse charge here. --Latest--