Any business offering services in the UK for business purposes must be aware of its VAT obligations and whether it must account for VAT on these supplies (this is known as a business’s output VAT). If you are a business owner, failing to meet your VAT obligations may result in financial penalties, so it is vital to understand the VAT landscape and what is required of your business.

Below, the experts at The VAT People will explore when a business should charge VAT on services, the various rates that apply, and when a business will not need to charge VAT.

When is VAT chargeable on services?

As a rule, VAT is generally due on almost any service provided by business in the UK, unless specifically exempted or relating to non-business activities. VAT is chargeable if the business is registered for VAT and if the supply is subject to a positive rate of VAT - meaning that it is not exempt from VAT or zero-rated, although zero-rated supplies are still taxable supplies for VAT purposes. As a result, it is important to seek official guidance on the services you provide to determine whether you can benefit from an exemption or zero rate of VAT, or if you need to charge your customers VAT at a positive rate.

* VAT is due on taxable supplies at three potential rates:

* Zero rate (0%)

* Reduced rate (5%) Standard rate (20%) – the standard rate is generally applied by exception, therefore if a supply is not specifically zero-rated, reduced-rated or exempt it will be standard-rated by default.

As stated above, some services - such as those relating to education - are exempt from VAT. VAT exemption is also likely to apply to a number of charitable activities, but not all, so you should confirm the appropriate VAT treatment of specific services your business provides, to help you to understand when you must apply VAT on your services. A key consideration in relation to exempt supplies is that input VAT incurred in the course of making these supplies cannot be recovered as input tax.

You can find the government guidance on the different rates of VAT on goods and services here.

Receive tailored VAT business advice

Understanding your VAT obligations can be confusing, but failing to meet them can result in lengthy and costly repercussions. The experts at The VAT People are here to help your business fulfil its tax duties, whatever the size of the company or the sector you work in. Our experienced staff have assisted businesses and not-for-profit organisations in charging the correct VAT on services and finding optimal avenues for dealing with HMRC.

Speak to a member of our experienced team of VAT consultants about your VAT obligations today by calling 0161 477 6600 or completing an online enquiry form and we will contact you at a time that is convenient for you. Any business offering services in the UK for business purposes must be aware of its VAT obligations and whether it must account for VAT on these supplies (this is known as a business’s output VAT).