Overview ― zero-rating

By Tolley
  • (Updated for Budget 2020)

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

  • Overview ― zero-rating
  • Overview of zero-rating
  • Summary of zero-rated supplies
  • Practical points for businesses making and receiving zero-rated supplies

This guidance note provides an overview of the types of goods and services which can be zero-rated for VAT purposes. It also discusses a number of practical points of general interest to businesses which make and receive zero-rated supplies.

Overview of zero-rating

A supply which is zero-rated is a taxable supply but taxable at a rate of 0%. The following key consequences therefore follow:

  • no VAT is charged on the supply
  • VAT can be recovered on costs associated with making the supply

For VAT recovery generally, see the What is input tax guidance note.

Basis of zero-rating

Broadly, supplies may be zero-rated for a number of reasons:

  • they may fall within one of the groups in VATA 1994, Sch 8
  • they may be goods exported out of the UK
  • they may be certain dealings on ‘terminal markets’
  • they may be certain services performed on warehoused goods
The groups of supplies which are zero-rated under VATA 1994, Sch 8 are summarised in this guidance note.
For the VAT treatment of goods removed from the UK, see the Exporting goods to non-EU countries and Supplies of goods within the EU guidance notes.
Dealings on terminal markets and services performed on warehoused goods are covered in De Voil Indirect Tax Service V4.208 and V4.209.

Summary of zero-rated supplies

There are 19 different groups of zero-rated supplies specified in VATA 1994, Sch 8.

A brief overview of each of these groups is provided below.
VATA 1994, s 30(1), Sch 8, Groups 1–19
The most commonly seen groups in VATA 1994, Sch 8 are explained in their own guidance notes.

For commentary on the less commonly seen zero-ratings, see De Voil Indirect Tax Service V4.210 which also contains more detailed commentary on the legislation and case law across all the zero-rating groups.

Group What s covered Where can I find commentary 1 Food There is a broad zero rating for food which can

More on Zero-rated supplies: