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When VAT should not be charged

Source: HM Revenue & Customs | | 17/12/2019

When a VAT registered business issues an invoice to their customer, they must seek to ensure that they charge the correct rate of VAT. Whilst most businesses in the UK charge VAT at the standard rate of 20%, there are a number of different VAT rates and exemptions to be aware of. These include the reduced VAT rate of 5% and the positive zero rate (0%).

There are two other categories that the supplies of goods and services can fall under:

  • Exempt - where no VAT is charged on the supply. Examples of exempt items include the provision of insurance, postage stamps and health services provided by doctors. If a business only sells VAT-exempt goods and services, they cannot register for VAT.
  • Supplies that are 'outside the scope' of the UK VAT system altogether. These supplies are beyond the realm of the UK VAT system and you cannot charge or reclaim VAT on these supplies. Examples include goods or services you buy and use outside of the EU, statutory fees - like the London congestion charge and goods you sell as part of a hobby.

If a business has made an error in charging VAT then this needs to be corrected. The timing of finding an error can impact on how the issue is resolved.

 

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McAllisters is a partnership trading from Paxton House, 11 Woodside Crescent, Glasgow providing accountancy and tax services and general business advice and is a member of ICAS (Registration No 0342) and an FCA exempt professional firm (No 301235). Its VAT number is 261 3019 94

McAllisters (Scotland) Ltd is a related business providing tax and business advisory services to McAllisters and its clients. McAllisters (Scotland) Ltd is registered in Scotland (Registration number SC146856). Its VAT number is 624 0564 62.

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