Tax Information UK

In the UK there are three different rates of VAT (Value Added Tax) - Standard, Reduced and Zero. which apply to different types of goods and services. In addition, some goods and services are exempt from VAT, while others are outside the scope of VAT........ This article provides a wealth of tax information, links and resources for UK based e-businesses.

TABLE OF CONTENTS On this page.....
VAT Overview & Internet Sales.... UK Tax Regulations UK Tax Rates: Standard Rate Reduced rate Zero-rated Exempt from VAT Outside the scope of VAT Tax advantages for new businesses   International Trade... VAT & International Trade VAT on sales to someone who isn't VAT registered in another EU country VAT on sales to someone who is VAT registered in another EU country	International Trade continued... Consignment Stocks & VAT VAT on exports of goods to non-EU countries Exports by retailers Digital Products...... Digital Products & VAT..... Digital Goods - Consumption Outside UK Guides & Resources.... Free VAT Guides.... Electronically Supplied Services Guide Contact HM Revenue & Customs
Important Note: Much of the information on this page was obtained from various UK Govt. websites, such as  HMRC website. We cannot guarantee that this information is correct or that it will remain correct in the future. You should always obtain up-to-date professional advice for important business & legal matters. A Word of gratitude to HM Revenue & Customs..... Due to the complex & legal nature of the information provided here, the content supplied on this page was obtained primarily from HM Revenue & Customs (HMRC), the official UK Government website for UK VAT (Tax) Revenue & Customs. Without the generosity of HMRC in allowing the use of this material this page would not have been possible.
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UK Tax Regulations...

UK Tax Rates...

(Important Note: Since the last UK election in mid 2010 this information or the items covered under it might have changed- please check the latest UK Government sources for up-to-date information on this matter - Regards, BIS Admin)

In the UK there are three different rates of VAT (Value Added Tax) - Standard, Reduced and Zero. which apply to different types of goods and services.

In addition, some goods and services are exempt from VAT, while others are outside the scope of VAT.

• Standard rate

• Reduced rate

• Zero-rated

• Exempt from VAT

• Outside the scope of VAT

You should always seek professional legal & or taxation advice for information that applies to your particular e-business.......

Standard rate:

(Important Note: Since the last UK election in mid 2010 this rate or the items covered by it might have changed (ie: I believe the standard rate will or has increased to 20%...) - please check the latest UK Government sources for up-to-date information on this matter - Regards, BIS Admin)

• The standard rate of VAT was 17.5 per cent until 30 November 2008.
• From 1 December 2008 to 31 December 2009 the standard rate was 15 per cent.
• On 1 January 2010 it will change back to 17.5 per cent.

Reduced rate - 5 per cent:

(Important Note: Since the last UK election in mid 2010 this rate might or the items covered by it might have changed - please check the latest UK Government sources for up-to-date information on this matter - Regards, BIS Admin)

• Currently, items including
  • Childrens Car Seats,
  • Nicotine patches,
  • nicotine gum (and other items to help people stop smoking that are bought over the counter),
  • plus a few other items are taxable at a reduced rate (5%) of VAT .

• You can see a full list of Reduced Rate goods via HM Revenue & Customs website page, "Goods & Services by VAT Rate"
  Website / Link: http://www.hmrc.gov.uk/vat/rates-goods.htm#2

Zero-rated:

(Important Note: Since the last UK election in mid 2010 this rate or the items covered under it might have changed- please check the latest UK Government sources for up-to-date information on this matter - Regards, BIS Admin)

• There are some goods and services that are zero-rated. This means that they're taxable for VAT, but the VAT rate is 0 per cent.

• Items which are currently Zero-Rated & which are commonly sold on the internet include;
  • Books,
  • newspapers,
  • magazines,
  • talking books,
  • printed music
  • and maps
  • Read more about VAT and printed items in VAT Notice 701/10
    Website / Link: http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true
  • Children's clothing and footwear that doesn't have VAT charged on it.
    Read More about VAT on children's clothing and footwear in VAT Notice 714
    Website / Link: http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true
  • Exports and despatches of goods and services to countries within and outside of the European Union.
    Read more about exports of goods: http://www.hmrc.gov.uk/vat/int-exports.htm
    Read more about exports of services: http://www.hmrc.gov.uk/vat/int-serv-abroad.htm

The HMRC website also has a guide which will tell you when you can zero-rate your goods, what evidence you need to keep, help you find what forms you will need and how to fill them in - see: http://www.hmrc.gov.uk/vat/int-exports.htm

Exempt from VAT

(Important Note: Since the last UK election in mid 2010 this rate or the items covered under it might have changed - please check the latest UK Government sources for up-to-date information on this matter - Regards, BIS Admin)

• Some goods and services are exempt from VAT. This means that VAT is not charged on them, but sometimes there are conditions attached.

• Some businesses who sell goods or services that are exempt from VAT may not be able to claim back all of the VAT that is charged to them on their purchases.

• If you don't know whether the goods and services you are supplying are exempt from VAT and they aren't listed in the document below, you can contact HM Revenue & Customs to check.

• More about exempt and partly-exempt supplies and businesses: http://www.hmrc.gov.uk/vat/reclaim-exempt.htm

Outside the scope of VAT

(Important Note: Since the last UK election in mid 2010 this rate or the items covered under it might have changed- please check the latest UK Government sources for up-to-date information on this matter - Regards, BIS Admin)

• Some goods and services aren't covered by the UK VAT system at all - they're outside the scope of VAT. You don't charge or reclaim VAT on goods or services that are outside the scope of VAT.
• You can see a list of goods & services that are outside the scope of VAT via HM Revenue & Customs website page, "Goods & Services by VAT Rate": http://www.hmrc.gov.uk/vat/rates-goods.htm#2.

Tax Advantages For New Businesses.....

(Important Note: Since the last UK election in mid 2010 this scheme or the items covered under it might have changed or been discontinued etc- please check the latest UK Government sources for up-to-date information on this matter - Regards, BIS Admin)

New businesses are eligible for a variety of tax allowances, reliefs, & Incentives which (currently) include:

• Capital Allowance Schemes for investment in equipment and premises,
• tax relief for small and medium-sized companies which invest in research and development,
• and stamp duty relief in disadvantaged areas.

New businesses don't automatically receive these tax advantages. You need to find out what you can claim and then apply for them.

• See "Starting In Business - How To Pay Less Tax" free guide from HM Revenue & Customs (located in our "Free VAT Guides" section, bottom of this page).

There is / was also the "Enterprise Investment Scheme" (EIS) which helps certain types of companies to raise capital by providing tax relief for investors in these companies.

• You can read more about the EIS Scheme via the HM Revenue & Customs website: http://www.hmrc.gov.uk/eis/

VAT and international trade...

(Important Note: Since the last UK election in mid 2010 this information or the items covered under it might have changed- please check the latest UK Government sources for up-to-date information on this matter - Regards, BIS Admin)

• When you sell, supply or move goods outside the UK - you may have to charge VAT or may be able to zero-rate the supply.

• If you import, acquire or buy goods from outside the UK - you may have to pay VAT but may be able to reclaim it or obtain relief (RGR).

See the following HM Revenue & Customs webpages for details on VAT & importing & exporting goods;

• Exports: http://www.hmrc.gov.uk/vat/int-exports.htm

• Imports: http://www.hmrc.gov.uk/vat/int-imports.htm

• VAT & International Trade: http://www.hmrc.gov.uk/vat/vat-international.htm

You should always seek professional legal & or taxation advice for information that applies to your particular e-business......

VAT on sales to someone who is VAT registered in another EU country....

(Important Note: Since the last UK election in mid 2010 this information or the items covered under it might have changed- please check the latest UK Government sources for up-to-date information on this matter - Regards, BIS Admin)

• If you supply goods to another EU country these sales are now technically known as despatches or removals rather than exports.
• The term 'exports' is reserved to describe sales to a country outside the EU.

• If you're sending goods to someone who is genuinely registered for VAT in the destination EU country, you can zero-rate the supply for VAT purposes, provided you meet all the conditions.

• See also; "Zero-rating goods sold within the EU" - http://www.hmrc.gov.uk/vat/int-exports.htm#6 for a list of conditions

VAT on sales to someone who isn't VAT registered in another EU country..

(Important Note: Since the last UK election in mid 2010 this information or the items covered under it might have changed- please check the latest UK Government sources for up-to-date information on this matter - Regards, BIS Admin)

• If you sell goods or services to someone who isn't VAT registered in another EU country, you must charge VAT in the normal way - just as you would for a UK customer.

• If you are responsible for delivery - that is, they don't collect them - then this is called a 'distance sale'. The most common examples are mail order or Internet sales to private individuals in another EU country.
• However, if you transfer your own goods to another EU country - whether to another part of your organisation, or simply to put in storage - this is treated as if you had made an acquisition in the destination country. You therefore have to account for VAT in that country, and if you're not registered for VAT there, that means paying VAT.
• See http://www.hmrc.gov.uk/vat/int-exports.htm#dy for more details

VAT on exports of goods to non-EU countries....

(Important Note: Since the last UK election in mid 2010 this information or the items covered under it might have changed- please check the latest UK Government sources for up-to-date information on this matter - Regards, BIS Admin)

• VAT is a tax charged on goods used in the EU, so if goods are exported outside the EU, VAT isn't charged.

• You can zero-rate the sale provided you get and keep evidence of the export, and comply with all other laws. You must also make sure the goods are exported, and you must get the evidence, within three months from the time of sale. This can be longer for goods that need processing before export and for thoroughbred racehorses.

• More about the conditions for zero-rating indirect exports in VAT Notice 703: http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true
  
• The HMRC website also has a guide which will tell you when you can zero-rate your goods, what evidence you need to keep, help you find what forms you will need and how to fill them in. See: http://www.hmrc.gov.uk/vat/int-exports.htm

Exports by retailers...

(Important Note: Since the last UK election in mid 2010 this information or the items covered under it might have changed- please check the latest UK Government sources for up-to-date information on this matter - Regards, BIS Admin)

• You can zero-rate sales of goods for export to private customers if you meet the conditions for commercial exports, or the conditions of a retail export scheme.
• More about the Retail Export Scheme in VAT Notice 704/1: http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true

Consignment stocks & VAT...

(Important Note: Since the last UK election in mid 2010 this information or the items covered under it might have changed- please check the latest UK Government sources for up-to-date information on this matter - Regards, BIS Admin)

• Consignment stocks are goods you despatch to another EU country where they're held somewhere before you finally supply them to a customer in that country. That means you have to account for VAT in that country, and may have to be registered there.

• See whether you need to register for VAT in other EU Countries here; http://www.hmrc.gov.uk/vat/int-exports.htm#dy

Digital Products & VAT.....

If you supply electronically supplied services you should read the section below ("Digital Goods - Consumption Outside UK") and also the free VAT Information Sheets listed in our Free Guides section.......

You should always seek professional legal & or taxation advice for information that applies to your particular e-business.......

Digital Goods - Consumption Outside UK

(Important Note: Since the last UK election in mid 2010 this information or the items covered under it might have changed- please check the latest UK Government sources for up-to-date information on this matter - Regards, BIS Admin)
Following the implementation of the VAT on E-Commerce Directive with effect from 1 July 2003, suppliers of electronically supplied services need to know the location and status of their customers as this will determine whether the supplies are subject to VAT and, if so, in which Member State.

• HM Revenue & Customs website states that "As technology cannot determine with certainty the place where such customers belong, self-declaration by the customer combined with a reasonable level of verification will be acceptable".
• For an explanation & clarity on what constitutes "A reasonable level of verification", see;
  • HM Revenue & Customs VAT info sheet 05/03 - "Electronically supplied services: evidence of customer location and status"

  or

  • Download it in PDF format from the HMRC Website

You should always seek professional legal & or taxation advice for information that applies to your particular e-business.......

Free VAT Guides....

• HM Revenue & Customs - Information & Guides

• HM Revenue & Customs - VAT

• Introduction to VAT What is VAT, how VAT works, different rates, who needs to register and links to more information

• Registering for VAT How and when to register for VAT, registering when you buy a business, registering groups or divisions of companies

• VAT and international trade If you buy, sell, supply or move goods or services to or from another country you may have to charge or pay VAT

• VAT returns, payments and refunds How to fill in your online or paper VAT return correctly and pay or reclaim the right amount of VAT

• VAT rates and charging and reclaiming VAT on sales and purchases Find out how and when to charge and reclaim VAT and the different VAT rates that apply

• Goods & Services by VAT Rate - This guide lists different goods and services by VAT rate, including items that are exempt from VAT or outside the scope of VAT.

• "Starting In Business - How To Pay Less Tax" from HM Revenue & Customs Website: http://www.hmrc.gov.uk/startingup/payless.htm

Guides Relating To Electronically Supplied Services

• 04/03 - Electronically supplied services: A guide to interpretation

• 01/03 - Electronically supplied services and broadcasting services: New EU place of supply rules

• Electronically supplied services: Special Scheme for non-EU businesses

• Electronically supplied services: evidence of customer location and status (Acrobat PDF, 43KB)

• Electronic Commerce (EC Directive) Regulations 2002 - available at www.opsi.gov.uk

• Privacy and Electronic Communications Regulations (EC Directive) 2003 - available at www.opsi.gov.uk

Contact HMRC (HM Revenue & Customs)

If you don't know whether the goods and services you are supplying are exempt from VAT and they aren't listed in the documents provided here (as links) or on the HMRC Website, you can contact HM Revenue & Customs to check.

• HMRC Website: http://www.hmrc.gov.uk/

• HM Revenue & Customs contact page: http://www.hmrc.gov.uk/menus/contactus.shtml