Overview ― items liable to VAT at the reduced rate

Produced by Tolley

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

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marked the end of the Brexit transition / implementation period entered into following the UK’s withdrawal from the EU. At this point in time, key transitional arrangements came to an end and significant changes began to take effect across the UK’s VAT and customs regime. This document contains guidance on subjects potentially impacted by these changes. Before continuing your research, see the Brexit — overview guidance note.

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.

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

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