Overview ― items liable to VAT at the reduced rate

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

  • Overview ― items liable to VAT at the reduced rate
  • Overview
  • List of items liable to VAT at the reduced rate
  • Group 1 ― supplies of domestic fuel or power
  • Group 2 ― installation of energy saving materials
  • Group 3 ― grant-funded installation of heating equipment or security goods or connection of gas supply
  • Group 4 ― women’s sanitary products
  • Group 5 ― children’s car seats
  • Group 6 ― residential conversions
  • Group 7 ― residential renovations and alterations
  • Group 8 ― contraceptive products
  • Group 9 ― welfare advice or information
  • Group 10 ― installation of mobility aids for the elderly
  • Group 11 ― smoking cessation products
  • Group 12 ― caravans
  • Group 13 ― cable-suspended passenger transport systems

Overview

The EU Commission allows EU member states to tax goods and services at a reduced rate of VAT and the minimum reduced rate that can be applied is 5%. As a result, the UK usually levies VAT at 5% on supplies of goods and associated services that are deemed to be for the benefit of the general public and / or can be used to boost trade in items that are considered to be for the benefit of the general public.

Due to restrictions imposed by the European Commission, the UK cannot extend the scope of the existing zero-rating provisions. As a result, it is not possible to tax further items at the zero rate of tax. The UK legislation that covers items taxed at the reduced rate of VAT is VATA 1994, Sch 7A. All of the items currently taxed at the reduced rate at shown in this guidance note. It should also be noted that there are limitations contained in the Principal VAT Directive (2006/112/EC , Annex III) that lists the items that can be taxed at the reduced rate of VAT.

VATA 1994, Sch 7A, Part II, s 29A
VAT registration

The value of reduced rate supplies are taken into consideration when determining whether the VAT registration threshold has been exceeded. Businesses need to monitor the level of all taxable supplies (20%, 5% and 0%) when calculating whether the business has exceeded the VAT registration threshold. For more information on registering for VAT, see the Overview ― registering for VAT and VAT registration procedure guidance notes.

Once registered it is imperative that the business introduces robust accounting practices and systems that ensure that any VAT charged is levied at the correct rate and recorded accurately in the business’ accounting or bookkeeping system. This is necessary in order to ensure that the business does

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