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The standard rate of VAT is 17.5%, 0r 1/47 of the consideration received for making a supply.
A lower rate of 5% (or 1/21 of the gross receipt) applies to some supplies such as domestic fuels and power, instillation of energy saving materials in houses, and some conversions of residential property.
A zero rate applies to a range of supplies including most food, books, new houses, and children’s clothes.
Certain other supplies are exempt, which means no tax is charged to the customer, but the supplier cannot recover VAT on costs. These include many land-related supplies, insurance, finance, education, health and welfare, and non-profit sports clubs. |
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An unregistered business must register if it has made £67,000 of taxable supplies in the last 12 months, up to any month end, or if it expects to make £67,000 of taxable supplies in the next 30 days.
A registered business can deregister if it can satisfy HMRC that taxable supplies in the next year will not exceed £65,000.
Small businesses with taxable turnover of up to £150,000 can opt to use the “flat-rate scheme”. A single rate, which varies with the type of business, is applied to all receipts, and no VAT is claimed on coasts. The single rate is lower than 7/47 to compensate for lost input tax.
Small business with taxable turnover of up to £1.35m can use the cash accounting scheme (only paying VAT to HMRC when customers have paid). The annual accounting scheme (filing a single VAT return each year instead of one every three months) is also availabe with turnover up to £1.35m. |
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