If you are considering VAT registration you’ll find there are a range of products and services that are subject to VAT exemption. If your company trades solely in these specific types of products and services, your business will be classed as VAT exempt. This would mean you won’t be able to register for VAT on purchases or sales.
Particular areas where VAT exemptions may apply include:
- Insurance, finance and credit
- education and training
- fund raising events by charities
- subscriptions to membership organisations
- selling, leasing and letting of commercial land and buildings (this exemption can be waived)
For more details on VAT exempt products visit the government’s online guide.
There are various ways in which businesses might purchase or sell supplies which are subject to partial VAT exemption.
For example, if your company purchases an item which is to be used for business and personal use the supply may be subject to partial exemption.
If your business purchases or sells supplies that the government classes as VAT exempt, but you also sell products which are subject to full VAT or reduced VAT payments, then you could also be classed as partially VAT exempt.
As a company that is registered for fully and partially taxable supplies it is your responsibility to keep separate ongoing records of your transactions to ensure that you pay the correct amounts of VAT on each.
Any exempt supplies should be recorded as such in your quarterly VAT return alongside your VAT taxable supplies.
The difference between exempt and 0% VAT
There are a number of supplies that have a VAT-able rate of 0%. Any supplier of zero rated goods should register for VAT. Any costs incurred by the business can still be reclaimed for VAT. However if the company is exempt as it trades VAT exempt supplies it cannot reclaim VAT on costs.
How to file for exemption from VAT
If you would like to file for VAT exemption you should do so using the registration form VAT1 available from the Gov.uk website.
When it comes to paying VAT for your business you should establish a strategy for managing payments and organise yourself to ensure that nothing comes back to haunt you. It makes sense to do your research early to ensure that you are making claims and allowances whenever you possibly can. Finally always be aware of how your decision can impact on both your customers and suppliers. Of course, effective accounting software will help you keep on top of your records and make sure you don’t miss a date.
Click here for more help keeping in line with business regulation.
Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.
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