Value Added Tax

Overview ― items liable to VAT at the reduced rate

Produced by Tolley
  • 06 May 2022 08:02

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

  • Overview ― items liable to VAT at the reduced rate
  • Overview
  • VAT registration
  • List of items liable to VAT at the reduced rate
  • Group 1 ― supplies of domestic fuel or power
  • Main exclusions
  • Group 2 ― installation of energy saving materials
  • Group 3 ― grant-funded installation of heating equipment or security goods or connection of gas supply
  • Group 5 ― children’s car seats
  • Group 6 ― residential conversions
  • More...

Overview ― items liable to VAT at the reduced rate


UK legislation contains a number of items that are liable to VAT at the reduced rate. This guidance note provides an overview of those items together with a link to the relevant guidance note where more information can be obtained on the scope of the reduced rate.

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 VAT registration and deregistration ― overview 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 not under declare VAT due to HMRC which will result in the imposition of interest and possibly penalties.

It should also be noted that it is likely that businesses involved in making supplies at the reduced rate of VAT will be supplying private consumers who cannot recover the VAT charged. Therefore, if the customer is incorrectly charged 20% VAT, on the supply that is liable to VAT at 5%, this will have a negative impact on the customer as they

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