Finance Division

Updated on July 18, 2022

When VAT is charged

In other words, VAT is a tax on what people really pay out of their own pockets.

VAT is charged on all goods and services that come within the tax’s scope. To determine whether something is subject to VAT, we must first determine:

To determine whether or not a transaction is subject to VAT.

Which rate of VAT should be charged to it if that is the situation?

In order for a transaction to be subject to VAT, it must include one or more of the following:

delivery of products or services to a customer;

given in exchange for something (often money);

produced in the United Kingdom or the Isle of Man

Taxable persons are those who are registered for VAT; and those who are registered for VAT are those who are taxed.

carried out in the course of a business or for its benefit.

When all of these conditions are met, the transaction is referred to as “outside the scope” of VAT.

For instance, a cab driver offers his services to students at the university.

Because of his or her modest yearly earnings, the driver does not meet the thresholds for VAT registration and is therefore not VAT registered. This means that the driver is not a “taxable person” for VAT reasons, and as a result the University will not be taxed on his services.

What is the rate of VAT applicable if the transaction falls within the scope of VAT?

Is it a one-off thing?

exempt(EX);

unrated (ZR), or

rates that have been lowered

In the absence of any of the aforementioned, the transaction will be standard-rated and subject to VAT at a rate of 20 percent, as will be addressed in greater detail later.

On CUFS, you may encounter additional VAT rates, such as EZS, EZSG, and RG and RS, as you process sales invoices. Sales to EU Members and Sales to the Rest of the World show how to use these additional zero-rating codes.

The vast majority of services and items acquired from outside the United Kingdom, as well as those purchased from other European Union member states, are subject to VAT. Purchasing goods from the European Union, goods from outside the European Union, and services from outside the United Kingdom are all subject to a self-charging VAT.

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