VAT: how the UK stacks up

24 November 2008

From 1 December, the standard rate of VAT in the UK will be 15%.

VAT (Value Added Tax) is the tax charged to consumers by a VAT registered seller on most services and products. Every country in the European Union has its own rate of VAT. In the UK, the main rate of VAT is 17.5% but there are also two reduced rates – 5% and 0%.

Services and goods that qualify for the reduced 5% rate of VAT include domestic fuel and power, women's sanitary products and children's car seats.

Examples of zero-rated items include most food (excluding meals in restaurants or hot takeaways), books and newspapers, children's clothing and public transport.

Some items are exempt from VAT. These include insurance products, education and training, charity fund-raising and subscriptions to membership organisations.

How the UK compares to other EU countries

EU member state Standard VAT Reduced VAT
Austria 20% 10%
Bulgaria 20% 7%
Belgium 21% 12%
Cyprus 15% 5-8%
Czech Repubilic 19% 5%
Denmark 25% n/a
Estonia 18% 5%
Finland 22% 8-17%
France 19.6% 5.5%
Germany19% 7%
Greece 19% 9%
Hungary 20% 5%
Iceland 24.5% 14%
Ireland 21% 13.5%
Italy 20% 10%
Latvia 18% 5%
Lithuania 18% 5-9%
Luxembourg15% 6%
Malta 18% 5%
Norway 25% 8-14%
Poland 22% 7%
Portugal 21% 5-12%
Romania 19% 9%
Slovakia 19% 10%
Slovenia 20% 8.5%
Spain 16%7%
Sweden 25% 6-12%
Switzerland 7.6% 3.6%
UK 17.5%
(15% from
1 December)
Source: European Commission
N.B Exemptions (0%) are not included

What is VAT-free?

Below is a full list of goods and services that attract VAT at reduced rates of 5% and 0%, as well as purchases that are exempt from VAT. Full details of criteria and exemptions can be found on HMRC website

Services which are exempt from VAT:

* Insurance, finance and credit
* Education and training
* Fund raising events by charities
* Subscriptions to most membership organisations
* Selling, leasing and letting of commercial land and buildings - but this exemption can be waived

Reduced rate 5%

* Children's car seats
* Electricity, gas and other types of fuel and power for household and non-business use - but power and fuel supplied to a business is standard-rated
* Conversion of a residential building to a different residential use
* Eco-friendly materials for insulation and saving or making power including wind turbines and solar panels
* Nicotine patches, nicotine gum and other items to help people stop smoking that are bought over the counter
* Energy saving materials that are installed in residential or charity premises
* Heating systems, security items, gas supplies and installations paid for by grants
* Renovation or alteration of empty residential premises
* Sanitary towels, tampons and other products for periods and after having a baby.

Zero-rated (ie, taxable for VAT, but the rate is 0%):

* Bicycle and motorcycle crash helmets don't have VAT charged on them if they meet safety standards
* Books, newspapers, magazines, talking books, printed music and maps
* Charity shops and selling goods that are donated
* Children's clothing and footwear
* Food including meat, ready meals and cakes - but not food supplied for catering or hot take-aways (and some less healthy foods)
* Publications, books, newspapers, magazines, talking books, printed music, maps and other printed material
* Passenger transport with a driver or crew, including vehicles, boats and aircraft
* Water supplies to households

* Advertising for charities
* Aircraft and helicopter building and repair
* Blind and partially sighted people can get some equipment VAT free or at a reduced rate, including talking books and vision aids
* Boots and helmets that are protective and for industrial use can be VAT free
* Caravans and Houseboats (depending on the definition)
* Construction and sale of domestic, residential and charitable buildings
* Disabled people can get some goods or services VAT free or at a reduced rate including beds, cars, ramps, some building work and chairlifts
* Exports and despatches of goods and services to countries within and outside of the European Union complicated, but depends on the tax status of the recipient, the nature of the good or service and the method of delivery)
* Freight containers used to export goods from the European Union (EU) or for goods that you send from the UK to a VAT registered customer in another EU country
* Freight transport
* Fundraising by charities may benefit from special VAT treatment
* Machine tools that are used to work on goods to be exported or removed another EU country
* Overseas and temporary visitors may be able to reclaim VAT back on purchases they've made in the UK
* Protective boots and helmets for industrial use can be VAT free
* Renovations or alterations to a listed or protected building or a scheduled monument
* Services provided internationally including working on goods for export, intermediary services and consultancy
* Sewerage services to domestic customers including emptying cess pools and septic tanks - but drain unblocking services are standard-rated
* Ship building, repairs and handling at ports in the UK
* Water supplies to industrial users

Exempt from VAT (ie, VAT is not charged but sometimes there are conditions attached):

*Admission charges by charities to museums, art exhibitions, zoos, theatres, musical or dance performances may qualify for VAT exemption
* Art and antiques that are sold to a public collection under a private treaty or used to settle part or all of an inheritance tax, capital transfer tax or estate duty debt with HMRC
* Betting and gaming
* Bingo (up to certain limits)
* Building sales and rental
* Car parking (mostly)
* Doctors, dentists and therapists services supplied by registered health professionals
* Education services (including vocational training, research, exam services) and school photographs may be exempt from VAT when provided by certain organisations
* Financial services like loans, insurance, credit, factoring and shares and securities
* Funerals (including burial and cremation)
* Gold investment coins (within certain criteria)
* Health and welfare services provided by a hospital, hospice or a nursing home
* Hospitals, hospices and nursing home services
* Lotteries
* Postal services supplied by the Post Office and Royal Mail
* Postage stamps (supplied by the Royal Mail)
* Sports and physical activity services (may be including life saving, archery, sand yachting and yoga.)

* Charity fundraising (except where it is on taxable business activity)
* Cultural exhibitions and events held by public authorities or other qualifying bodies
* Insurance including supplies by Friendly Societies, medical and welfare funds, insurance supplied with other goods and services and insurance supplied outside the UK
* Land and property including sales of land and buildings - but a supplier of land or property may waive the exemption and opt to tax it at the standard rate
* Moorings for houseboats including car parking for the boat owner
* Sponsorship and fundraising for charities

Outside the scope of VAT:

* Donations to charity that are freely given and where the giver doesn't receive anything in return
* Hobbies, private or personal activities that aren't included in your business
* MOT testing
* Tolls for bridges, tunnels and roads operated by public authorities - but tolls for privately operated bridges, tunnels and roads are standard-rated
* Welfare services provided by charities at below cost price may be outside the scope of VAT

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