| Liability to value added tax (VAT) VAT is
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| | - Sales of new residential buildings and
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| charged on the value of supplies of
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| | buildings for use by charities.
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| taxable goods and services made in the
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| | - Supplies of services by contractors
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| UK, including some exports to EU
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| | when constructing new residential
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| countries. It is also chargeable on
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| | buildings or buildings for charities.
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| imports of goods from outside the EU.
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| | - Alterations to some buildings where
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| The main rates are zero and 17.5%, but a
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| | listed building consent is needed.
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| few supplies are charged at 5%.
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| | - Public transport of passengers.
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| Registration
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| | - Drugs, medicines and aids for the
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| The supply of any goods and services,
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| | disabled.
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| which are subject to VAT at any rate are
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| | - Clothing and footwear for children.
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| called taxable supplies whether you are
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| | - Exports of goods and certain services
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| VAT registered or not. All traders must
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| | to non-EU countries.
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| register for VAT if they make taxable
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| | Reduced rate supplies
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| supplies which exceed the set limits.
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| | Some supplies are charged at a rate of
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| Where the value of taxable supplies in
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| | 5%. They include:
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| the previous 12 months was more than
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| | - Domestic power and fuel and certain
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| £61,000, or is likely to exceed this
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| | energy saving materials for residential
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| annual limit within the next 30 days, the
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| | or charitable use.
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| trader has to register within 30 days.
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| | - The grant funded installation of
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| Failure to notify on time attracts
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| | heating equipment and the connection of a
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| penalties.
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| | mains gas supply in the sole or main
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| The VAT system
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| | residence of an individual aged 60 or
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| A registered trader must charge customers
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| | more or in receipt of social security
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| output VAT on any sales. The value of
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| | benefits.
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| input VAT can be offset against output
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| | - Woman's sanitary protection products.
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| VAT and the excess output VAT is paid
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| | - Children's car seats.
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| over to Customs and Excise. Where there
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| | - Cycle helmets.
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| is an excess of input VAT, tax may be
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| | - Conversions of residential property
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| reclaimed.
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| | into a different number of dwellings,
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| Some input VAT cannot be reclaimed:
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| | certain conversions into care homes or
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| - Purchases of motor cars, except cars
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| | multiple occupancy dwellings, and certain
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| bought wholly for business purposes.
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| | renovations or alterations of property
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| - Business entertainment expenses.
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| | that has not been lived in for three
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| Most businesses have to account for VAT
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| | years.
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| at the date that the invoice for the
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| | EU single market
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| supply is raised. However, traders can
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| | Where sales are made to businesses that
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| claim VAT bad debt relief on debts more
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| | are registered in other EU countries, the
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| than six months old that have been
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| | supplier need not charge VAT.
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| written off.
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| | - The customer's VAT number must be shown
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| Traders with a turnover of not more than
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| | on the sales invoice.
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| £660,000 may account for VAT on a cash
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| | - The customer is then responsible for
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| basis rather than an invoice basis,
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| | accounting for output VAT on the goods on
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| thereby obtaining automatic relief for
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| | its own VAT return, but may claim input
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| any bad debts. This limit is due to be
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| | VAT if the goods are for use in making
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| increased to £1,350,000 probably from 1
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| | taxable supplies.
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| April 2007, subject to EC approval.
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| | - However, output VAT must be charged on
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| Exempt supplies
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| | sales to private individuals in other EU
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| Certain supplies are exempt from VAT.
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| | states. Where such sales exceed that
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| Output VAT is not charged on such
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| | state's registration threshold, the
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| supplies and, in principle, input VAT
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| | trader must register for VAT in that
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| attributable to such supplies cannot be
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| | state.
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| reclaimed (or the claim is restricted).
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| | Collection of VAT
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| Relatively small businesses may be able
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| | Registered traders normally have to
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| to reclaim all their input VAT - even for
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| | submit VAT returns, and pay any VAT due,
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| their exempt supplies. The input VAT
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| | every three months.
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| attributable to their exempt supplies
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| | - Traders who regularly reclaim VAT from
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| must not exceed £7,500 a year and must
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| | Customs and Excise may apply to submit
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| be no more than half the VAT on all their
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| | monthly returns.
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| purchases.
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| | - Some large companies have to pay
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| - Exempt supplies include: insurance,
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| | monthly.
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| finance, health, education, and burial
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| | - Tax on imports from outside the EU has
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| and cremation services.
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| | to be paid at the time of importation,
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| - In general, leases and sales of
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| | unless special arrangements are set up.
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| non-domestic land and buildings, other
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| | - Traders with a turnover of £1,350,000
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| than newly built ones, are exempt, unless
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| | a year or less can complete annual
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| the option to tax has been exercised.
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| | returns only, making nine monthly VAT
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| - A taxable person may choose to charge
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| | payments on account, with a final payment
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| output VAT on supplies of existing
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| | due along with the year-end return.
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| buildings and land (including rents) that
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| | - Very small businesses can simplify
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| are not used for residential or
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| | their accounting by applying to pay VAT
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| charitable purposes.
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| | at a flat rate on total turnover without
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| - Sales of new buildings are
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| | deducting input tax. The business must
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| standard-rated unless they are used for
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| | have taxable turnover (including exempt
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| residential or charitable purposes.
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| | supplies) up to £150,000 and total
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|
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| | turnover of not more than £187,500. The
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| Zero-rated supplies
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| | rate is determined by trade sector.
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| If a business makes zero-rated supplies,
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| | - Penalties are charged for late or
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| it does not charge VAT on supplies but
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| | incorrect VAT returns.
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| can reclaim input VAT.
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| | - A default surcharge of between 2% and
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| Zero-rated supplies include :
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| | 15% of the VAT payable is charged where
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| - Most food and some drinks - but not
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| | returns are late.
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| catering, restaurant meals or hot
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| | - A penalty of 15% is charged for serious
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| take-away food.
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| | or persistent misdeclarations.
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| - Domestic supplies of water and
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| | - Interest can also be charged on VAT
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| sewerage.
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| | paid late.
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| - Books and most other publications.
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