Which Products and Services Are Exempt From VAT?
If you have bought goods and services in the UK, you probably already know about value-added tax or VAT. But do you know what goods and services are VAT exempt? Check out our list below.
1. Some food and drink
Most food and drink for human consumption is VAT exempt, but there are some important exceptions.
Food and drink that is not VAT exempt
- Food served in restaurants
- Certain supplies relating to hot catering and hot takeaway food (but until 30 September 2021, the VAT has been reduced to 5%)
- Alcoholic drinks, home brewing and wine making kits
- All soft drinks including sports drinks and mineral water
- Confectionery including cereal bars
- Chocolate-covered biscuits
- Crisps and savoury snacks
- Ice cream
Confusingly, biscuits without chocolate and all cakes are exempt from VAT. And in case you were wondering, this includes Jaffa Cakes.
2. Children’s clothes
Clothing for young children has been charged 0% VAT since the tax was introduced in 1973. This includes babywear and children’s shoes.
3. Publications
Items such as books, magazines, newspapers, maps and charts, printed music, children’s painting and picture books, brochures and leaflets are VAT exempt.
To make home entertainment more affordable for people forced to stay at home during the pandemic, the UK government announced that the 0% VAT rate would apply to all e-publications from 1 May 2020.
4. Some medical supplies and equipment
This includes all prescription medicines, sanitary products, incontinence products and equipment designed for disability care, such as wheelchairs, alarms and/or specially designed motor vehicles.
There’s also no VAT on the cost of building work required to ensure disabled access.
5. Charity shop goods
Goods donated to charity shops with the intention of being resold are VAT exempt.
6. Antiques
The VAT exemption applies to proceeds from the sale of all antiques and works of art by private residences to public institutions.
7. Some admission charges
Charges for admission administered by charities or cultural organisations are exempt from VAT. Qualifying organisations include museums, galleries, zoos and other performance organisations.
8. Gambling
There’s no VAT to pay on lottery ticket sales, bingo, betting and any other games of chance. This applies to games and tickets purchased online as well as over the counter.
9. Financial, insurance and investments
Financial products such as loans and credit, insurance premiums and fees and charges associated with investments.
10. Health and medical
VAT is not charged for services provided by healthcare professionals including doctors, dentists, opticians and pharmacists. The cost of care provided by a hospital, hospice or nursing home is also exempt.
11. Sporting activities
Certain sporting and physical education services supplied by eligible bodies are exempt. An eligible body must be non-profit and non-commercial.
12. Education services
Fees for vocational training, education and other connected services provided by an educational organisation such as a school, college or university are not charged VAT.
13. Funeral services
This includes the cost of burial, cremation or burial at sea. Funeral plans provided by insurance companies are also exempt.
14. Some membership fees
Most membership fees are subject to VAT, but the UK treasury makes an exception for some non-profit organizations.
In order to be eligible, the organization has to charge fees for different benefits included in the subscription.
15. TV licence fee
There’s no VAT to pay on all types of TV licence.
Finally
Further information about the VAT rates on different goods and services is available from the gov.uk website.
General Considerations
Businesses that sell VAT exempt goods should be aware of the following rules:
- VAT should not be included in the price of any exempt items that you sell.
- Businesses cannot reclaim VAT on any exempt items that they purchase or on any expenses incurred.
- Any VAT exempt sales do not count when calculating your VAT taxable turnover. For example, this would be used to ascertain if you exceed the VAT registration threshold (currently £85,000). This means that if a business only sells VAT-exempt goods and services, they cannot register for VAT.
- No VAT invoice should be issued for exempt sales.
- No VAT is chargeable on an exempt supply, and input VAT cannot be recovered except as allowed under the partial exemption provisions.
