Originally written by Anna Jordan on Small Business
It’s vital for your business that you know which products and services are subject to VAT and at what rate.
There are five categories of product or service for VAT. The majority of goods and services are Standard rated (subject to VAT at the standard rate, currently 17.5 per cent), some are ‘Exempt’, some are or ‘Zero-rated’ and some are at a ‘Reduced Rate’ (currently five per cent). Others are outwith the scope of VAT, which we’ll talk about in a minute.
These rates may only apply if certain conditions are met or in particular circumstances, depending on some or all of the following factors.
Who’s providing or buying them
Where they’re provided
How they’re presented for sale
The precise nature of the goods or services
Whether you obtain the necessary evidence
Whether you keep the right records
Whether they’re provided with other goods and services
Other conditions might also apply.
>See also: 7 tax myths for small business owner/managers exploded
Food and drink for human consumption is normally zero-rated, with the exception of catering, alcoholic drinks, confectionary, crisps and savoury snacks, sports drinks, hot food, hot takeaways, ice cream, soft drinks and mineral water.
Restaurants must always charge VAT on everything eaten either on their premises