UK VAT rates and VAT compliance

UK VAT rates

Whilst the UK is obliged to follow the VAT compliance rules of the European Union, it has more freedom to set its own rates, including the standard (upper) VAT rate. The only proviso is that it is above 15%. Suppliers of goods or services VAT registered in UK must charge the appropriate VAT rate, and collect the tax for onward payment to the UK tax authorities through a VAT filing: see UK VAT returns briefing.

The current rates are:

British VAT rates

Rate Type Which goods or services
20% Standard All other taxable goods and services.
5% Reduced Children’s car seats; certain social housing; some social services; electricity, natural gas and district heating supplies (for domestic use only); some energy-saving domestic installations and goods; LPG and heating oil (for domestic use only); some renovation and repairs of private dwellings; some medical equipment for disabled persons.
0% Zero Some social housing; printed books (excluding e-books); newspapers and periodicals; renovations to private housing; collections of domestic refuse; household water supplies; basic foodstuffs (excluding highly processed or pre-cooked food); some take away food; cut flowers and plants for food production; prescribed pharmaceutical products; certain medical supplies for disabled persons; domestic passenger transport; children's clothing and footwear; children’s diapers; live animals destined for human consumption; seed supplies; supply of animal feed; supplies of residential caravans and houseboats; construction of residential buildings (excludes conversion of non-residential into dwellings); some supplies of new buildings; sewerage services; motor cycle and bicycle helmets; commercial ship and aircraft stores; intra-community and international passenger transport; some gold ingots, bars and coins.


UK VAT compliance

Once a foreign enterprise has received its UK VAT number, it will be obliged to follow the VAT Act.  This includes:

  • Preparing invoices with the disclosure details outlined in the UK VAT Act.
  • Electronic invoices with proper signature, authenticity and agreement by the recipient.
  • Maintenance of accounts and records, which must be held for at least 7 years.
  • Correct invoicing of customers for goods or services in accordance with the UK time of supply VAT rules.
  • Processing of credit notes and other corrections.
  • Use of approved foreign currency rates.

What is the tax point for UK VAT?

The tax point (time of supply) rules in the UK determine when the VAT is due.  It is then payable to the tax authorities 30 days after the VAT reporting period end (monthly or quarterly).

For most goods, it is the time of delivery or passage of title.  For services, it is the completion of the service.

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