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What does Zero Rated for VAT mean?

VAT is charged on a wide range of goods and services in the UK, as well as in many parts of the EC.  The VAT status of different goods and VAT rates is set by the UK government and within the law.

A number of goods and services are chargeable to VAT at “zero percent”.  This generally means that the goods do fall within the VAT regime, but an additional VAT charge is not applied.  Zero rates sales still count as taxable supplies.  Therefore businesses that sell zero rated goods still get the benefit of treating these as taxable supplies and as such this does not affect their ability to recover VAT on purchases made.

There are a wide range of goods where zero rating applies, which includes: advertising for charities, good sold at charitable events, selling donated goods, equipment for disabled people, prescriptions, sewerage and related utility services, certain construction services, passenger transport and printing services.

Zero rating can also apply to the sale of some goods and services made internationally within the EC.

Importantly, note that zero rated is not the same as “exempt” or “outside the scope”, as these both have very different implications for VAT purposes.

For more information on VAT, please contact Wisteria’s tax department on 020 8429 9245.