VAT Exempt Goods
Certain goods are exempt from VAT. The more prominent of these goods are certain properties or buildings that are sold or let; insurance, postal services, museum ticket entries and the lottery are included in this list as well.
Different VAT rates
In the United Kingdom, there are three VAT rates:
- The normal rate of 20% added on to most goods and services.
- The special rate of 5% which is normally applied to energy companies (fuel, electricity, gas...), and certain renovation services for properties.
- The 0% tax rate can be applied to certain foods meant for human consumption, such as raw meat and vegetables. (This rate is not applied to the catering services). It is also applied to books, magazines, medicines, and children’s apparel.
It is important to note that the business or self-employed individual that sells goods or services that are VAT exempt cannot claim VAT on purchases made aligned to their business.
However, the business or self-employed individual that sells goods or services at 0% VAT rate can claim VAT on purchases for the sale of those goods.
Non-Deductible VAT on certain purchases
There are certain expenditures that are not VAT-deductible, and therefore cannot be reclaimed to HMRC. These expenditures include vehicles (unless these vehicles are intended for professional use), restaurants, drinks, hotels, tickets to concerts. VAT can be reclaimed on business travels done by employees.