Value Added Tax (VAT)
VAT is due on supplies of goods and services which are provided in the UK by a taxable person who is registered for VAT, and also on the importation and acquisition of goods and some services.VAT is a charge that companies are required to make to customers if they supply goods or services in the UK, and if their taxable turnover is above (or expected to be above) the registration threshold, which is currently £67,000.
There are three rates of VAT in the UK:
|
Standard Rate |
17.5% |
Applies to most goods |
|
Reduced Rate |
5% |
Applies to fuel and power used in the home, and to charities |
|
Zero Rate |
0% |
Applies to most food, books and clothing for young children |
Source: European Commission, 2007
Some business supplies are exempt from VAT, and do not form part of a company's taxable turnover. Examples include the selling and leasing of land and buildings, insurance, and selected education and training activities.
Once a company is VAT-registered, it will be able to claim back any VAT charged to it on business-related goods and services. Further information is available at HM Revenue & Customs website: www.hmrc.gov.uk/.
The levels of VAT in the UK are competitive in comparison with other European countries:
|
Country |
Standard VAT rate (%) |
|
Sweden |
25 |
|
Poland |
22 |
|
Ireland |
21 |
|
Belgium |
21 |
|
Portugal |
21 |
|
Hungary |
20 |
|
Italy |
20 |
|
France |
19.6 |
|
Czech Republic |
19 |
|
Netherlands |
19 |
|
Germany |
19 |
|
UK |
17.5 |
|
Spain |
16 |
