VAT Zero, Standard and Exempt Rated Examples

Exempt Rated VAT

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In the UK, exempt items for VAT refer to goods and services that are not subject to VAT at any rate (0%, 5%, or 20%). When a business supplies exempt items, they do not charge VAT, and they generally cannot reclaim VAT on related costs (input VAT) for those exempt supplies.

• Exempt items do not appear in Box 1 (Output VAT) of the VAT return because VAT is not charged on them.

• The value of exempt supplies should be included in Box 6 (Total Value of Sales Excluding VAT) on the VAT return.

• Businesses making mostly exempt supplies may have limited or no ability to reclaim VAT on related expenses (input VAT). This is known as partial exemption.

Understanding which goods and services are VAT-exempt is crucial for accurate VAT reporting and ensuring compliance with HMRC regulations.

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Examples of Exempt Rated VAT​

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1. Financial Services:

• Banking services: Including loans, credit, credit card handling fees, and savings accounts.

• Insurance services: Including premiums, reinsurance, and insurance brokerage services.

• Investment and fund management services: Including pensions, investment advice, and shares or bond sales.
   

2. Education and Training:

• Tuition provided by schools, colleges, and universities, as well as private tuition for certain subjects.

• Vocational training provided by a recognised body or employer, or courses that lead to a qualification.
   

3. Health and Medical Services:

• Medical care provided by registered health professionals, including doctors, dentists, and opticians.

• Dental care services.

• Medical prescriptions and certain other healthcare products provided through the NHS.

• Alternative medicine (if performed by a recognised practitioner).
   

4. Charitable Fundraising Activities:

• Fundraising events organised by charities or certain other bodies.

• Donations to charities are also exempt from VAT.
   

5. Land and Property Transactions:

• Sales of commercial property over three years old (although you can opt to tax and make them standard-rated).

• Rental of residential property (e.g., rental income from residential landlords).

• Sales of residential property, except for new builds (new builds are zero-rated).

• Letting or leasing of land or buildings for residential or charitable purposes.
   

6. Postal Services:

• Post Office services: Standard postal services provided by Royal Mail under a universal service obligation (e.g., stamped letters, parcels).
   

7. Betting, Gaming, and Lotteries:

• Profits from betting, gaming, and lotteries, including casino services and the National Lottery.
   

8. Cultural Services:

• Admission to museums, galleries, and cultural events run by eligible bodies such as public museums, art galleries, or cultural charities.
   

9. Subscriptions to Trade Unions or Professional Bodies:

• Membership fees for trade unions or professional bodies (as long as they don't provide significant taxable benefits in return).
   

10. Burial and Cremation Services:

• Funeral services and related goods (such as coffins) provided by a funeral director.
   

11. Sports and Physical Recreation:

• Sporting activities provided by non-profit making bodies (e.g., membership subscriptions to sports clubs, certain activities like swimming or fitness classes, etc.).
   

12. Residential Care and Welfare Services:

• Care services provided by charities or state-regulated welfare providers, including care homes.

• Welfare services provided by eligible charities or non-profit organisations, such as home care services for elderly or disabled people.