VAT Advice

Outputs are sales, and output tax is VAT due on sales. The standard VAT rate is 20%, which applies to most supplies of goods or services. There are also some sales with are chargeable at the reduced rate (5%), or the zero rate (0%). Other services are exempt from VAT.

The principle is that unless your supplies are explicitly listed, they will be standard rated. The difference can of course be significant. This means it is imperative to determine if your supplies are not standard rated.

The following is the list of zero rated items:

Bank notes	Food	Clothing & footwear
Construction of buildings	Transport	Tax-free shops
Taking books for the blind and handicapped & wireless set for the blind	Caravans & houseboats	Sewerage Services & water
International, Services	Charities	Books
Gold	Drugs, medicines & Reliefs for people with disabilities	Protected Buildings

You should note that, for each item, therefore are various exclusions. This means that, for example, not every supply of food is zero rated. But a supply of food may be zero rated if it is not excluded from zero rating. The same applies to all the other categories.

The following is the list of reduced rated items:

Residential conversions	Domestic fuel & power	Smoking cessation products
Welfare advice & information	Installation of energy-saving materials	Caravans
Residential renovations and alterations	Women’s sanitary products	Contraceptive products
Mobility aids for the elderly	Grant funded installation of heating equipment, security goods, connection of gas supply	Children’s car seats

The following is the list of exempt items:

Sports, sports competitions & physical education	Burial & cremation	Health & welfare
Land	Works of art	Fund raising events by charities & qualifying bodies
Cultural services	Education	Postal services
Betting, gaming, and lotteries	Supplies of goods where input tax cannot be claimed	Subscriptions to trade unions, professional and other public interest bodies
Insurance	Finance	Investment gold

If your supplies are exempt, then you cannot claim VAT back. The value of such supplies is also excluding when determining your turnover for registration purposes.

by Leshoward