Value Added Tax (VAT) is a tax charged
when you buy goods and services in the
United Kingdom or Isle of Man.
It is also charged on goods, and some
services, that are imported from places
outside the European Community (EC)
and on goods and services coming into
the UK from another EC Member State.
Business supplies inlude:
• selling new and used goods, including
hire purchase;
• providing a service, for example,
hairdressing and decorating;
• charging an admission price to go
into buildings; or
• self-employed people providing supplies,
e.g some salesmen and subcontractors.
You
can start trading but you cannot charge
or claim VAT unless you are VAT registered.
Your
should register
if
you supplied taxable goods and services
amounting to more than £56,000
in the last 12 month period,
or if you anticipate supplying taxable
goods and services amounting to more
than £56,000 in the next 30 day period
alone.
Or, if you have taken
over a VAT registered business as a
going concern...
Then:
You must notify your Customs and Excise
local VAT office immediately of liability to register for VAT.
(See: Where do I send my forms?)
Businesses
with a turnover below this threshold
can register voluntarily. Sometimes
there can be a business advantage in
doing this. If you are considering voluntary
registration you can get further information
from Customs and Excise National Advice
Service on 0845 010 9000 - or seek advice
from your accountant.
Rates of VAT
- Standard
Rate @17.5% - Most goods and services,
- Reduced
Rate @5% - Fuel and power used in
the home and by charities
women's
sanitary products,
- Zero
Rate @0% - certain goods and services
on which you do not need to charge
VAT (examples)
Zero-rated
supplies
These
are taxable supplies on which the current
VAT rate is 0%.
Examples include:
• most food (but not meals in restaurants
or cafes and hot take-away food and
drink);
• books;
• newspapers;
• young children's clothing and shoes;
• exported goods (For further information
see Notice 703 Exports and removals of goods from the UK.);
• most prescriptions dispensed to a
patient by a registered pharmacist;
• and most public transport services.
This list is not exhaustive and further
information regarding zero-rated supplies
can be found in the Customs and Excise's Notice 700 The VAT Guide. If all or most
of your supplies are zero-rated, you
may not need to be registered for VAT.
This is called exemption from registration
(see more info on exemption).
Exempt
supplies
Exempt
supplies are business supplies other
than taxable supplies on which VAT is
not charged.
Examples include:
• selling, leasing and letting land
and buildings (but not lettings of garages,
parking spaces or hotel and holiday
accommodation). See Notice 742 Land and property;
• insurance;
• betting, gambling and lotteries (but
not takings from fruit machines);
• providing credit;
• certain education and training;
• fund raising events by charities;
• subscriptions to certain membership
organisations;
• the services of doctors and dentists;
• and certain services from undertakers.
This list is not exhaustive and further
information regarding exempt supplies
can be found in the Customs and Excise's Notice 700 The VAT Guide.
If you are registered for VAT and make
some exempt supplies, you may not be
able to get all your input tax back.
Notice 706 Partial exemption tells you more about this.
If all your supplies are exempt, you
will not be able to register for VAT.
However if you make supplies of finance
or insurance services or of investment
gold to customers in countries outside
the European Community, you may register
on a voluntary basis, in order to claim
back any input tax you have paid in
respect of these specified supplies.
You are also able to recover input tax
where your supply consists of insurance
and finance services (including intermediary
services) that are directly linked to
the export of goods from within the
EC to outside the EC, regardless of
where the recipient of the supply is
established. If you are making this
type of supply and think you might be
able to register, you should contact
HM Customs and Excise for further advice.
For
further details:
• List of local VAT offices
• HM Customs and Excise Web site: http://www.hmce.gov.uk/
• National Advice Service Tel: 0845
010 9000
• Read the leaflet 'Starting your own
business' (CWL1) which contains further
information and the CWF1 form for notifying
self-employment to the Inland Revenue
and Customs and Excise. Either department
can supply the leaflet CWL1 and their
telephone numbers are in directories
under those headings.
VAT
Questions?
Customs
and Excise provide answers to frequently
asked questions on their website:
VAT registration: basic information
Deciding if you need to register
15. How to complete application Form VAT1
16. How to complete application Form VAT1A
17. How to complete application Form VAT1B
18. How to complete application Form VAT1C
19. How to complete application Form VAT1TR
20. to appoint a tax representative
in the UK
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