Exemptions from VAT
Exemptions from VAT

The following Tax guidance note provides comprehensive and up to date legal information covering:

  • Exemptions from VAT
  • Supplies of land
  • Supplies of insurance
  • Supplies of financial services
  • Supplies of education
  • Supplies of health and welfare
  • Other exempt supplies

Brexit: As of exit day (31 January 2020) the UK is no longer an EU Member State. However, in accordance with the Withdrawal Agreement, the UK has entered an implementation period, during which it continues to be subject to EU law. For further guidance, see Practice Note: Brexit—UK tax consequences.

VAT is chargeable on supplies of goods and services made in the UK by a taxable person in the course of a business unless those supplies are exempt (or zero-rated, for which, see Practice Note: VAT—zero-rated and reduced rate supplies).

VAT exemption has three main consequences:

  1. the supplier is not required to charge VAT

  2. the value of the supply is not taken into account when deciding whether the supplier must register for VAT, and

  3. the supplier cannot recover any input tax attributable to its exempt supplies—for a business that makes only exempt supplies, input tax is therefore an absolute (and not just a timing) cost

For an explanation of the rules on recovery of input tax, see Practice Note: When can a person recover VAT?

The UK legislation lists 16 categories of exempt supplies, referred to as groups. These are derived from Council Directive 2006/112/EC (the VAT Directive), but there can be important differences. In cases of doubt, the UK courts will look for guidance at the provisions of the VAT Directive. The general