Value Added Tax or VAT was originally introduced as a simple tax method on certain items that we purchase but over the years it has become more and more complicated and is why many businesses opt to use companies like https://www.randall-payne.co.uk/ who are Accountants Cheltenham area rather than struggle to understand all the regulations and tax rates themselves.
VAT is essentially a tax on certain goods and services across the whole of the EU. The tax is automatically included in the price of the items that you buy with companies breaking this down on the invoices and receipts that you receive in order for you to be able to claim the VAT on your own business VAT return if you are registered. Each EU country can set their own rate of VAT and here in the UK there are currently three different ratings with a standard 20 percent rate, a reduce 5 percent rate and finally a 0 rating. The reduced rate is applied on items such as energy supply including gas and electricity to your property and also children’s car safety seats.
There are a number of items that are classed as 0 rated and these include all children’s clothing and shoes, books, magazines and newspapers, fee for travelling on public transport and a few other items. The UK government website gives you a full run down of each category of goods and services that fall within each VAT rating band. There are also items that are classes as exempt from VAT and these include insurances and memberships as well as MOT tests.
Interesting there have been a number of debates over the years over certain items as to whether or not they should be subjected to VAT. Here are some quirky facts about VAT:
- If you are a bee keeper you will be subjected to VAT if your purchase bumblebees but not if you buy honeybees.
- A shortbread biscuit covered with chocolate is subject to VAT but if you create a millionaire shortbread by adding in a layer of caramel it is no longer rated for VAT.
- Ferrets are subject to VAT as they are classified as pets, however rabbits are not and so VAT is not payable on the purchase of rabbits.
- Books are VAT exempt but eBooks are not classified as an exempt item.
- Some nuts that are still sold whilst in the shells are zero-rated for VAT purpose, but those that have been de-shelled are subject to VAT.