Goods and Services sold outside the scope of VAT

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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.
  • Vehicle scrappage scheme; Transport for London TFL and others.
  • Personal sales:
  • Occasionally,
  • 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.
  • Including:
  • advertising,
  • 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.
  • Events.
  • Intermediaries.
  • Work carried out on goods.
  • Transport.
  • 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.

Contact us to determine the category of your supplies, for the VAT flat rate scheme or for general VAT and tax advice