What is outside the scope of VAT?

Updated on June 2, 2022

Definition of outside the scope of VAT

The VAT does not apply to all sales of goods and services. They are exempt from VAT, so if you sell them or buy them, you won’t have to pay any VAT and you won’t be able to reclaim any VAT.

How is this different from exempt sales and costs?

Boxes 6 and 7 of your VAT return would still include exempt sales and costs, but in the majority of circumstances, costs that are not subject to VAT would be completely excluded from your VAT return. Depending on where your clients are and the VAT scheme you are utilising, sales may or may not be included.

Examples of goods and services outside the scope of VAT

VAT does not apply to charges imposed by the government, such as MOT testing and tolls on state-owned bridges. There is no VAT on wages provided to employees.

In our reference to VAT rates, you may learn more about which items and services are exempt from VAT.

Due to changes in tax law since publication, we cannot guarantee the accuracy of information contained in this glossary despite our best efforts. Consequently, it should not be depended upon in the event of a change in circumstances. This glossary does not constitute legal advice and you should consult a tax professional if you have any questions regarding the content. FreeAgent Practice Partners are available in your area if you don’t already have an accountant.

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