Goods and Services sold outside the scope of VAT
Outside the scope of UK VAT
- Outside the scope of VAT means that:
- You do not charge VAT on the sales.
- You do not include the sales figures in your VAT returns.
- Different rules apply for Corporation Tax and self employed sole trader income tax.
- "Outside the scope" is not the same as zero-rated.
- This is an important distinction for VAT flat rate scheme traders.
- It will be important if you wish to avoid compulsory VAT registration and relevant services apply.
Simply defined categories - sales outside the scope of VAT
- Sales when you are not registered for VAT.
- AND you do not need to be registered.
- See VAT registration compulsory - voluntary.
- Statutory fees and services, eg
- MOT testing - particularly important for motor repairers on the VAT Flat rate scheme.
- Congestion charge.
- Personal sales:
- And not as part of your business,
- And for private purposes such as hobbies.
- Take care to avoid an HMRC inspector disagreeing with your view during tax enquiries or investigations.
- Donations to charity where the giver does not receive anything in return.
- Tolls for bridges, tunnels and roads operated by public authorities.
- Low cost welfare services provided by charities.
More complex definitions - sales of services outside the European Union EU
Many European countries are outside the European Union EU.
Service place of supply - Place of belonging
- If the place of supply of your service is not in the UK, then your supply of services sale is outside the scope of VAT.
- Place of supply depends on place of belonging.
- Normally place of belonging is decided by the 'general rule'.
- Business customer - where the customer belongs; do not charge VAT.
- A UK registered limited company will always belong in UK; do charge VAT.
- unless the service is supplied to an overseas company, outside UK, who own the UK company; do not charge VAT.
- Non-business customer - where the supplier belongs; do charge VAT.
- Certain services:
- Non-business customer where the customer belongs; do not charge VAT.
- intellectual property rights,
- legal services,
- accountancy; unless to a UK company see above.
- Special rules for the place of supply:
- Hiring out a means of transport.
- Land and property services.
- Work carried out on goods.
- Check Special rules for the place of supply
Transfer of a business as a going concern (TOGC)
- Subject to a number of conditions, most of which are not considered here:
- Transfer of a business as a going concern (TOGC), by law, is ‘neither a supply of goods nor a supply of services’ and is therefore outside the scope of VAT.
- Where the seller is VAT registered the purchaser must be VAT registered or must become VAT registered as a result of the Transfer of the business as a going concern (TOGC).
- If you purchase a business with past sales in excess of £ per year, rate effective from this will be a compulsory VAT registration.