Overview - items that are exempt from VAT

By Tolley
VAT_tax_img4

The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Overview - items that are exempt from VAT
  • Overview
  • List of supplies that are exempt from VAT
  • Group 1 – land
  • Group 2 – insurance
  • Group 3 – postal services
  • Group 4 – betting, gaming and lotteries
  • Group 5 – finance
  • Group 6 – education
  • Group 7 – health and welfare
  • Group 8 – burial and cremation
  • Group 9 – subscriptions to trade unions, professional bodies and other public interest bodies
  • Group 10 – sport, sports competitions and physical education
  • Group 11 – works of art
  • Group 12 – fund-raising events by charities and other qualifying bodies
  • Group 13 – cultural services – admissions to museums, exhibitions, zoos and performances of a cultural nature supplied by public bodies and eligible bodies
  • Group 14 – supplies of goods where input tax cannot be recovered
  • Group 15 – investment gold
  • Group 16 – Supplies of services by groups involving cost sharing

A business or person that only makes exempt supplies is not entitled to register for VAT in the UK. This is because only businesses that make taxable supplies are entitled to register for VAT.

 

Overview

A business or person that only makes exempt supplies is not entitled to register for VAT in the UK. This is because only businesses that make taxable supplies are entitled to register for VAT. In reality there would be little point in a business that makes wholly exempt supplies VAT registering, as it would not be able to reclaim any input tax incurred on costs associated with its business activities and no VAT needs to be declared on exempt sales.

However, many businesses supply a mixture of exempt and taxable supplies and are therefore usually required to be registered for VAT if the value of the taxable activities exceeds the VAT registration threshold.

A business can also voluntarily VAT register if the business is trading under the UK VAT registration threshold. This may be beneficial if the business makes supplies to VAT registered businesses as this would enable the business to recover some of the VAT incurred. If the business makes supplies to a non-VAT registered customer, it may be more beneficial to refrain from VAT registering until the registration threshold is exceeded, if this would help to keep the prices charged competitive in comparison with a VAT registered business trading in the same sector. For more information on registering for VAT, see the Overview - registering for VAT and VAT registration procedure guidance notes.

VATA 1994, Sch 9

Examples - VAT registration in respect of taxable and exempt supplies

Partial exemption

A business which makes supplies that are taxable and exempt are deemed to be partly exempt for VAT purposes. A partly exempt business can recover all of the VAT incurred on costs associated with its taxable business activities and none of the VAT incurred in respect of its wholly exempt business activities.

However, these types of businesses will also have incurred

More on Exempt supplies: