In the UK, there are 3 different rates of VAT and you must make sure you charge the right amount.
Standard rate
Most goods and services are standard rate. You should charge this rate unless the goods or services are classed as reduced or zero-rated.
This includes:
- any goods below the distance selling threshold you supply to non-VAT registered EU customers – if you go over the threshold you’ll have to register for VAT in that country
- most services you supply to an EU non-business customer – there are different rules for business customers
Reduced rate
When the reduced rate is charged, it can depend on what the item is as well as the circumstances of the sale, for example:
children’s car seats and domestic fuel or power are always charged at 5%
mobility aids for older people are only charged at 5% if they’re for someone over 60 and the goods are installed in their home
Zero rate
Zero-rated means that the goods are still VAT-taxable but the rate of VAT you must charge your customers is 0%. As a VAT registered entity, you still have to record them in your VAT accounts and report them on your VAT Return. Examples include:
- books and newspapers
- children’s clothes and shoes
- motorcycle helmets
- most goods you export to non-EU countries
- goods you supply to a VAT registered EU business – you can check if the VAT number is valid
If you sent goods to the EU, you’ll need their VAT number and paperwork proving that the goods have been sent within certain time limits (usually 3 months).
Rates can change and you must apply any changes to the rates from the date they change.