It’s vital for your business that you know which products and services are subject to VAT and at what rate.
There are five categories of product or service for VAT. The majority of goods and services are Standard rated (subject to VAT at the standard rate, currently 17.5 per cent), some are ‘Exempt’, some are or ‘Zero-rated’ and some are at a ‘Reduced Rate’ (currently five per cent). Others are outwith the scope of VAT, which we’ll talk about in a minute.
These rates may only apply if certain conditions are met or in particular circumstances, depending on some or all of the following factors.
- Who’s providing or buying them
- Where they’re provided
- How they’re presented for sale
- The precise nature of the goods or services
- Whether you obtain the necessary evidence
- Whether you keep the right records
- Whether they’re provided with other goods and services
Other conditions might also apply.
>See also: 7 tax myths for small business owner/managers exploded
Food and drink for human consumption is normally zero-rated, with the exception of catering, alcoholic drinks, confectionary, crisps and savoury snacks, sports drinks, hot food, hot takeaways, ice cream, soft drinks and mineral water.
Restaurants must always charge VAT on everything eaten either on their premises or in communal areas designated for their customers to use, like shared tables in a shopping centre. Restaurants and takeaway vendors must charge VAT on all hot takeaways and home deliveries, but do not need to charge VAT on cold takeaway food unless it’s to be eaten in a designated area. From July 15 2020 to March 31 2021, certain supplies of catering and hot takeaway food that would normally be taxable at the standard rate were liable to the reduced rate of 5 per cent.
Certain animals, animal feeding products, plants and seeds are also zero-rated, but only if the conditions the relevant VAT notice are met. Please note that products packaged as pet food are standard rated.
You may be wondering about the difference between exempt and zero-rated. Zero-rated are products and services which the Government charges VAT on but that rate is currently set to zero. Exempt items have no VAT paid or charged, but you still need to include them in your VAT return.
We’ll explain what types of goods and services you’ll find under each VAT category, including some examples. The ‘more information’ columns have links to Government resources with further details about that VAT category. For a complete list, head to VAT notices in alphabetical order on the Government’s website.
>See also: VAT on taxi fares, vehicles, fuel and staff travel – what can I claim?
Products and services with zero-rated VAT
Zero-rated supplies include water and sewerage services, books, newspapers and leaflets, talking books for the blind, transport services, exports of goods, children’s clothing and shoes and for supplies of certain qualifying buildings such as newly constructed residential buildings and substantial reconstructions of protected buildings.
| Good/service | More information |
|---|---|
| Advertising services for charities | VAT Notice 701/58 |
| Certain goods sold at charitable fundraising events | Charity fund-raising events and VAT |
| Charity shops – selling donated goods | Charitable donations and VAT |
| Construction and sale of new buildings for a relevant charitable purpose | VAT Notice 708 |
| Building services for disabled people | Notice 701/7 VAT reliefs for disabled people |
| Equipment for blind or partially sighted people | Equipment for blind or partially sighted people |
| Equipment for disabled people | Equipment for disabled people |
| Magnetic tape adapted for recording speech for blind people together with apparatus for making and playing the adapted tape and certain low vision aids | Aids for blind people |
| Dispensing of prescriptions by a registered pharmacist | VAT Notice 701/57 |
| Incontinence products | VAT Notice 701/7 |
| Maternity pads | VAT Notice 701/18 |
| Sanitary protection products | VAT Notice 701/18 |
| Low vision aids | Equipment for blind or partially sighted people |
| Cesspools, septic tanks or similar (domestic) – emptying | Emptying industrial cesspools, septic tanks or similar is standard-rated – VAT Notice 701/16 |
| Sewerage services supplied to domestic or industrial customers | Sewer and drain cleaning, unblocking or maintenance is standard-rated – VAT Notice 701/16 |
| Water supplied to households | Water supplied to industrial customers is standard-rated – VAT Notice 701/16 |
| Substantial reconstructions to protected buildings that are buildings used as a dwelling, for a relevant residential purpose or for a relevant charitable purpose | VAT Notice 708 |
| The installation of a bathroom or lavatory, constructing ramps and widening doorways or passageways for disabled people in their own home | Building services for disabled people |
| Construction and first freehold or long leasehold sale of a new building for a relevant charitable purpose | VAT Notice 708 |
| Construction and first freehold or long leasehold sale of a new building for relevant residential purposes | VAT Notice 708 |
| Construction and first freehold or long leasehold sale of new domestic buildings | VAT Notice 708 |
| First freehold or long leasehold sale of a commercial building converted into a dwelling or dwellings | VAT Notice 708 |
| First freehold or long leasehold sale of buildings converted for relevant residential purposes | VAT Notice 708 |
| First freehold or long leasehold sale of buildings converted for relevant charitable purposes | VAT Notice 708 |
| Sale or long lease of a new dwelling with garage or parking space | VAT Notice 708 |
| Aircraft repair and maintenance | VAT Notice 744C |
| Freight transport to or from a place outside the UK | VAT Notice 744B |
| Freight containers – sale, lease or hire to a place outside the UK and the EU | VAT Notice 703/1 |
| International freight transport that takes place in the UK and its territorial waters | VAT Notice 744B |
| Passenger transport in a vehicle, boat or aircraft that carries not less than 10 passengers | VAT Notice 744A |
| Aircraft repair and maintenance | VAT Notice 744C |
| Airships – sale or charter | VAT Notice 744C |
| Caravans (more than 7 metres long or more than 2.55 metres wide, can be 0% or 5%) | Taxing holiday caravans |
| Civil aeroplanes – sale or charter | Gliders – sale or charter – are standard-rated as are hot air balloons – VAT Notice 744C |
| Helicopters – sale or charter | VAT Notice 744C |
| Houseboats – sale or let out on hire | But holiday accommodation let in a moored houseboat is standard-rated –VAT Notice 701/20 |
| Military aeroplanes – sale or charter | VAT Notice 744C |
| Ship repairs and maintenance | VAT Notice 744C |
| Shipbuilding – 15 tons or over gross tonnage | VAT Notice 744C |
| Brochures | VAT Notice 701/10 |
| Leaflets | VAT Notice 701/10 |
| Pamphlets | VAT Notice 701/10 |
| Books | VAT Notice 701/10 |
| Children’s painting and picture books | VAT Notice 701/10 |
| Maps and charts | VAT Notice 701/10 |
| Magazines | VAT Notice 701/10 |
| Newspapers | VAT Notice 701/10 |
| Printed or copied music | VAT Notice 701/10 |
| Publications | Some items are standard-rated such as exercise books, letterheads, posters – VAT Notice 701/10 |
| Babywear | VAT Notice 714 |
| Children’s clothes and footwear | VAT Notice 714 |
| Cycle helmets – CE marked | VAT Notice 701/23 |
| Motorcycle helmets that meet safety standards | VAT Notice 701/23 |
| Protective boots and helmets for industrial use | VAT Notice 701/23 |
| Financial services including the issue, transfer or receipt of, or dealing with money, securities for money or orders for the payment of money | VAT Notice 701/49 |
Products and services exempt from VAT
Exempt supplies include financial and insurance services, betting and gaming, health and welfare services and education.
| Good/service | More information |
|---|---|
| Admission charges by charities | How VAT applies to charities |
| Admission charges by public authorities or eligible cultural bodies to certain cultural events such as visits to museums, art exhibitions, zoos and performances | VAT Notice 701/47 |
| Antiques, works of art or similar (as assets of historic houses) sold by private treaty to public collections | VAT Notice 701/12 |
| Antiques, works of art or similar (as assets of historic houses) used to settle a tax or estate duty debt with HMRC | VAT Notice 701/12 |
| Betting and gaming – including pool betting and games of chance | VAT Notice 701/29 |
| Bingo – including remote games played on the internet, telephone, television or radio | VAT Notice 701/29 |
| Burial or cremation of dead people, or burial at sea | VAT Notice 701/32 |
| Care or medical treatment provided by a qualifying institution like a hospital, hospice or nursing home | VAT Notice 701/31 |
| Charitable fundraising events | Charity fund-raising events and VAT |
| Education, vocational training and other connected services provided by an eligible body like a school, college or university | VAT Notice 701/30 |
| Financial service supplied as a separate element but with other goods or services | VAT Notice 701/49 |
| Financial service supplied as part of a single supply with other goods or services | VAT Notice 701/49 |
| Friendly society subscriptions for the provision of insurance | VAT Notice 701/36 |
| Funeral plans written under contracts of insurance | VAT Notice 701/36 |
| Garages or parking spaces let together with dwellings (under shorthold tenancy agreements) for permanent residential use | Garages or facilities specially designed for parking are standard-rated – VAT Notice 742 |
| Gold investment coins | VAT Notice 701/21 |
| Health services provided by registered doctors, dentists, opticians, pharmacists and other health professionals | VAT Notice 701/57 |
| Houseboat moorings | VAT Notice 742 |
| Insurance and reinsurance transactions | VAT Notice 701/36 |
| Insurance brokers and agents acting in an intermediary capacity | VAT Notice 701/36 |
| Insurance supplied as a separate element but with other goods or services | VAT Notice 701/36 |
| Insurance supplied as part of a single supply with other goods or services (Exempt if insurance is the principal element of the supply) | VAT Notice 701/36 |
| Lottery ticket sales | VAT Notice 701/29 |
| Online lottery games | VAT Notice 701/29 |
| Parking – grant, or licence, to occupy land on which incidental parking takes place | VAT Notice 742 |
| Parking spaces or garages supplied with houseboat moorings | VAT Notice 742 |
| Physical education and sports activities | VAT Notice 701/45 |
| Property, land and buildings – grant, or licence, to occupy land or buildings | VAT Notice 742 |
| Public postal services provided by the Royal Mail under a universal service obligation | VAT Notice 742 |
| Retailer commission on lottery ticket sales | VAT Notice 701/29 |
| Sponsored charitable events | Charities and VAT |
| The granting of credit such as loans | VAT Notice 701/49 |
| The management of credit by the person who has granted it | VAT Notice 701/49 |
| The provision of the facility of instalment credit finance for example hire-purchase | VAT Notice 701/49 |
| The provision of qualifying financial intermediary services | VAT Notice 701/49 |
| The issue, transfer or dealing with a security, including shares and bonds | VAT Notice 701/49 |
| The operation of a current, deposit or savings account | VAT Notice 701/49 |
| The management of a qualifying special investment fund | VAT Notice 701/49 |
Products and services with reduced (5 per cent) VAT
Reduced rate supplies include domestic fuel or power, installation of energy saving material, certain conversions of buildings into residential accommodation and also for renovation and alteration of residential buildings that have been empty for more than two years.
| Good/service | More information |
|---|---|
| Energy-saving materials permanently installed in dwellings and buildings used for a relevant residential purpose providing the total cost of them (not including VAT) is not over 60% of the cost of the installation of the products (not including VAT) | Energy-saving materials – supply only – are standard-rated – VAT Notice 708/6 |
| Mobility aids for the elderly | Mobility aids for older people |
| Smoking cessation products – nicotine patches and gum | Read Budget Note BN77 (PDF, 42K) |
| Electricity for domestic and residential use or for non-business use by a charity | Fuel for business use is usually standard-rated – VAT Notice 701/19 |
| Gas for domestic and residential use or for non-business use by a charity | Fuel for business use is usually standard-rated – VAT Notice 701/19 |
| Heating oil for domestic and residential use or for non-business use by a charity | Fuel for business use is usually standard-rated – VAT Notice 701/19 |
| Solid fuel for domestic and residential use or for non-business use by a charity | Fuel for business use is usually standard-rated – VAT Notice 701/19 |
| Air source heat pumps | VAT Notice 708/6 |
| Boilers – wood fuelled | VAT Notice 708/6 |
| Central heating and hot water controls | VAT Notice 708/6 |
| Draught stripping | VAT Notice 708/6 |
| Ground source heat pumps | VAT Notice 708/6 |
| Insulation | VAT Notice 708/6 |
| Micro combined heat and power units | VAT Notice 708/6 |
| Solar panels | VAT Notice 708/6 |
| Water and wind turbines | VAT Notice 708/6 |
| Closed solid fuel fire cassettes | VAT Notice 708/6 |
| Electric dual immersion water heaters with factory-insulated hot water tanks | VAT Notice 708/6 |
| Electric storage heaters | VAT Notice 708/6 |
| Gas-fired boilers | VAT Notice 708/6 |
| Gas room heaters with thermostatic controls | VAT Notice 708/6 |
| Oil-fired boilers | VAT Notice 708/6 |
| Radiators | VAT Notice 708/6 |
| The installation, repair and maintenance of a boiler, radiators, pipework and controls forming a central heating system (including micro combined heat and power systems) | VAT Notice 708/6 |
| The installation, repair and maintenance of renewable source heating systems. This means space or water heating systems which use energy from: renewable sources, including solar, wind and hydroelectric power; or near renewable sources, including ground and air heat | VAT Notice 708/6 |
| Connection or reconnection to the mains gas supply | VAT Notice 708/6 |
| Converting existing premises by increasing the number of dwellings within the building | VAT Notice 708 |
| Renovating a dwelling that has been empty for at least 2 years | VAT Notice 708 |
| Carrycots with restraint straps | VAT Notice 701/23 |
| Children’s car seats, booster seats and booster cushions | VAT Notice 701/23 |
| Children’s safety seats with bare wheeled framework | Prams and pushchairs are standard-rated – VAT Notice 701/23 |
Products and services that are outwith the scope of VAT
VAT doesn’t apply to some goods at all. These are outwith the scope of VAT. If you sell them, you won’t be charged VAT and if you buy them, there won’t be any VAT to reclaim.
| Good/service | More information |
|---|---|
| Voluntary donations to charity | Donations to charities |
| Welfare services provided by charities at significantly below cost | VAT Notice 701/1 |
| Tolls for bridges, tunnels and roads operated by public authorities | Privately-operated tolls for bridges, tunnels and roads are standard-rated – VAT Notice 700 |
| Direct-mail postal services meeting all the conditions of VAT Notice 700/24 3.2 and 3.3 | VAT Notice 700/24 |
If you’re in any doubt, it’s best to check in with an accountant. The Government website also has a lot of useful resources, including VAT on goods sent overseas.
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