VAT rates and schemes

There are a number of VAT schemes which may be appropriate for your business. These include the annual accounting scheme, cash accounting scheme and flat rate scheme. These can reduce paperwork, simplify bookkeeping and aid cash flow.

If you are likely to be VAT registered or operate a VAT scheme it is important to obtain the correct professional advice beforehand. See http://www.hmrc.gov.uk/vat/start/schemes/index.htm.

The standard rate of VAT is 20%. There is a reduced rate of 5% which applies to some specific types of goods and supplies such as domestic fuel, and zero rate (0%) applies to food and some other items.

There is a final category of exempt supplies. These are items which are outside the scope of VAT – such as some financial services. Exempt supplies is a complex area. Businesses which make exempt supplies cannot recover all the VAT paid on the goods and services which they buy