If you are a trader, a manufacturer or any other organization including a charitable one in a eu country that has adopted vat then knowing about vat exempt goods and services can save a lot of money. If you are located in the UK then there are several goods and services that are exempt from collecting or paying any vat and you should keep an eye out on any exemption that affects your business or organization if you want to save money and remain on the right side of vat rules.
The UK has three vat rates roughly similar to most other eu countries that follow vat. The standard rate of vat in the UK is 17.5% followed by the reduced vat rate of 5%. Finally some goods and services attract zero vat rates while certain goods and services usually related to socio-economic sectors are exempt from any vat. The difference between zero vat and vat exemption is that while you can claim any vat previously paid on zero vat goods and service, it is usually not possible to go in for vat refunds on vat exempt goods and services, although there are a few exceptions. In the UK, it is HM Revenue and Customs or hmrc vat department that handles all issues related to vat and you will need to check on their 14,000 classifications to find out if any goods or services related to your business or organization falls under the exempt category.
For example, most betting activities in the UK including online and actual lottery sales are exempt from vat while so are bingo games, pool and games of chance. Sales of antiques or works of art too are exempt from vat. Most activities related to charity are also exempt although a few activities fall under the zero vat rate. Similarly, many medical services are exempt although some medical goods fall under the zero or reduced vat rate. Most education services along with parking garages also fall under the exempt category although books and magazines fall under the zero vat categories. Most insurance services along with select financial services are also vat exempt. Many public utility services including electricity, gas and heating oil attract reduced vat rates.
You should visit the hmrc vat website to look at the complete list of exemptions and should also hire a competent vat agent that has complete knowledge on uk vat as well as eu vat classifications so as to learn all about exempt goods and services. This would become even more crucial if you import or export goods or services that jump from one classification to another after manufacturing. For example while raw paper might attract a particular rate of vat, a finished book might fall under the zero vat category. In such a case, you could be entitled to a vat refund on vat paid on raw materials to lower your costs. If you are part of a charitable organization then although organizing a particular number of events in a year might be exempt from vat, certain types of income generated from that charitable event might not be exempt from vat.
All eu countries including the UK that follow vat usually have certain goods and services that are exempt from paying or collecting any vat. You should take all efforts to know all about vat exempt goods and services, and also about vat reclaiming rules so as to save money while remaining on the right side of the law.