Are you a UK Business buying services such as legal, advertising or consultancy from non UK suppliers, then read our comprehensive guide on how reverse charge VAT applies. Introduction Reverse Charge VAT, means that the customer (Business Customers) is accountable for paying the output VAT (VAT on Sales) in relation to a suppliers invoice for services. There are two aspects of reverse charge VAT as follows: International Domestic International Applies to both sales and purchases of services (outputs and Inputs). Reverse Charges Applied to Sales / Outputs Where a UK VAT registered supplier supplies services to a non UK customer and the services would normally be subject to VAT in the UK, the supplier would not include UK VAT on their invoice to the customer as the supply is outside the scope of UK VAT. Instead the supplier would write the words "reverse charge applies" on the invoice and as such this would inform the customer that they may be required to self account for VAT in their local jurisdiction. So for example a UK consultancy firm invoicing a business customer in France where the French customer would have to pay French Reverse Charge VAT on the total value of the invoice to the French Tax Authorities. Reverse Charges Applied to Purchases / Inputs Where a UK business purchases services from a non UK supplier primarily to be consumed in the UK, they will have to self account for reverse charge VAT at 20% to HMRC based on the total value of the invoice from the non UK supplier. The main purpose here is to ensure UK businesses that purchase services from UK suppliers are not placed at a disadvantage to businesses that source services from non UK suppliers and save 20% UK VAT. How it works - The UK VAT Registered business customer will have to include 20% VAT applied to the total value of the overseas invoice on their VAT return in Box 1 (VAT Payable). For example if a business seeks legal advice from a supplier based in France and the total value of the invoice is £1,000, then the UK business customer will have to self account and pay £200 output VAT to HMRC. However the UK business customer will be able to recover all or some of this VAT from HMRC and can either put the same VAT figure as in Box1 in box 4 (Input VAT Recoverable) on their VAT return or a portion of the VAT based on a specific percentage they are allowed to recover. If the business only makes taxable supplies to their customers, then they will be able to recover the reverse charge payable to HMRC in full and as such the effect would be a nill payment to HMRC as amounts in box 1 (VAT Payable) will equal box 4 (VAT Recoverable) on their VAT return. Where the purchaser is a partial exempt business (see how VAT works button), it will only be able to recover a portion of the reverse charge VAT from HMRC depending on the purchasing businesses Partial Exemption Recovery Rate. Note: Most services purchased from non UK suppliers by UK VAT registered businesses will be in scope of reverse charges unless they are: Property related (Land and Buildings) transactions including hotel bills for non UK stay Admission to non UK events Transport related such as taxis while travelling on business abroad. Services that would normally be Exempt in the UK like Financial Services such as insurance, the purchase of shares. Services purchased from non UK suppliers such as the ones below will all be Reverse Chargeable in the UK at 20% Accountancy Services Consultancy Services Legal Services Supply of staff or contractors Advertising Domestic Domestic reverse charge is similar to International Reverse Charges in that the customer is required to self account for VAT. The difference is that domestic reverse charges applies to specified transactions between UK to UK businesses . The main aim here is to prevent / reduce, eliminate fraudulent traders who set up companies, issue VAT invoices for goods and collect the VAT and fail to declare this to HMRC. (Basically the responsibility for paying output VAT is switched from the supplier to the customer) How it works - Invoices issued by VAT registered UK Business Suppliers to VAT registered UK Business Customers will show the net amounts only and no VAT applied. On receipt of these invoices for services, the UK business customer will self account for VAT at 20%. The customer will be responsible for paying this VAT to HMRC and if they only make taxable supplies in their business, they will be able to recover this VAT and in effect there will be a nil payment due to HMRC. So box 5 VAT payable / recoverable will be zero. For Example - if a UK subcontractor in the construction industry invoices its main UK contractor for services which are covered by the Construction Industry Scheme , for £100,000 then their invoice to the contractor will only show £100,000 and carry the words "reverse charge applies". The UK subcontractors VAT return will only include £100,000 sales in box 6 on their VAT return. The UK contractor will then have to self account for £20,000 of Output VAT on their VAT return under the CIS reverse charge VAT procedure by including this amount in Box 1 (VAT payable) on their VAT return. Additionally the contractor (if they only make taxable supplies (standard and zero rated supplies) can recover this £20,000 from HMRC by including the amount in Box 4 on their return. This means their box 5 payable amount will be zero. However the UK contractor will also need to include the net amounts £100,000 in both Box 6 & 7 on their VAT return. Than Following Services are in scope of UK Domestic Reverse Charges: Mobile Phones Computer Chips Wholesale Gas and Electricity (not Gas and Electricity to retail consumers) Wholesale Telecommunication Services Construction Industry (Construction Industry Scheme Contactors) For more information please read: Domestic reverse charge procedure (VAT Notice 735) Reverse Charge VAT - Guide on How Reverse charge VAT is Applied

US Sales Tax News - Stay up to date with the latest news and articles covering sales taxes for different states, tax rates, legislation and the tax landscape. US Sales Tax News - Read the latest US Sales Tax News Headlines Updated 24/7 US Sales Tax News articles - Read the latest US sales Tax news including articles covering individual states, sales tax rates, legislation and the political arena addressing issues concerning sales tax and much more. Sales Tax in the United States is a consumption tax levied on the sale or lease of goods and services. Unlike VAT which is a general consumption tax, sales tax is only added to the final retail sale which retailers calculate and collect from consumers and then periodically remit to the state. There is no single national sales tax rate and as such different states will apply different rates and exemptions. VAT Digital.Com Demystifying US Sales Tax

Guide on how VAT is applied to Insurance services in the UK. Including the VAT rules, VAT Law and rates applicable Introduction In basic terminology, Insurance is the guarantee to compensate an individual or company for a specified loss. To ensure losses are covered, individuals or companies will pay a premium to an insurance company on a monthly or annual basis. Generally, something is insurance for VAT purposes if it’s an activity that requires the provider to be authorised as an insurer under the provisions of the Financial Services and Markets Act 2000 (FSMA). VAT Liability of Insurance The supply of Insurance services to customers in the UK is Exempt from VAT. Supplies of Insurance made to non UK customers is outside the scope of UK VAT. However VAT can be recovered in relation to these supplies under the Specified Supplies Order. Note: for insurance intermediary services, the right to recover input VAT has been restricted by HMRC to circumstances where the final consumer (insured party) of such services belongs outside the UK following the FTT decision in Hastings Insurance Services Ltd (2025) UKFTT 275 (TC). See link to HMRC policy. VAT deduction on insurance intermediary services ... Note: there maybe situations where a number of services including insurance are supplied together as a bundle and as such there may be mixed supplies for VAT purposes. Please click on the below HMRC insurance VAT guide for more details on how to determine the correct VAT treatment. Insurance (VAT Notice 701/36) -Contains public sector information licensed under the Open Government Licence v3.0. Insurance and VAT - Guide on how VAT is Applied to Insurance

HMRC Business Risk Reviews are an integral tool used by HMRC to ensure Large businesses are maintaining adequate and robust controls for Tax Reporting and compliance. "Take the heavy lifting out of your role search!" Business Risk Review - Guide on HMRC Business Risk Reviews The Business Risk Review plus (BRR+) is the primary mechanism through which HMRC assesses the tax compliance risk of the UK’s largest and most complex businesses. Under the "plus" model introduced in 2019, the review has shifted from a simple "Low Risk/Non-Low Risk" assessment to a more granular, four-tier rating system. Scope of the Review & Frequency The Business Risk Review + is usually conducted by a Customer Compliance Manager (CCM). It applies to large businesses, meeting one or more of the following: UK Turnover: Over £200 million. Assets: Gross balance sheet assets over £2 billion. Complexity: Smaller businesses that HMRC deems high-risk or complex (e.g., multinational groups). The frequency of these reviews is determined by a company's current risk rating: Low Risk: Usually reviewed every 3 years. Moderate, Moderate-High, or High Risk: Reviewed annually. Risk Categories HMRC assigns one of the following ratings based on the review: Low - HMRC has high confidence in the business's systems and openness. Interaction is minimal. Moderate - Generally compliant but has some gaps in processes or occasional aggressive tax positions. Moderate-High - Significant concerns regarding governance or recurring errors. High - Frequent disputes, poor systems, or lack of transparency. This triggers intense HMRC scrutiny. Assessment Pillars HMRC evaluates the business across all applicable tax regimes including VAT using three standards Systems and Delivery - HMRC reviews your VAT processes and controls to determine if it is robust enough to deliver accurate VAT reporting. Resources - Is the tax team sufficiently staffed and skilled? Technology - Are accounting systems fit for purpose for the business's scale? Accuracy - Is there evidence of repeated basic errors or "failure to take reasonable care Internal Governance - This focuses on management accountability and compliance with statutory regimes. SAO Compliance: Adherence to Senior Accounting Officer (SAO) requirements. Tax Strategy: Is your tax strategy published and followed in practice Uncertain Tax Treatment (UTT): How you identify and notify HMRC of uncertain positions. Internal Policy on VAT Compliance - Basically the business's relationship with HMRC. Transparency: Do you disclose issues in real-time before filing Interpretation: Do you take aggressive positions that push the boundaries of legislation Collaboration: How quickly and accurately do you respond to HMRC queries Low Risk Checklist VAT Risk Matrix - Ensure there is an up to date VAT risk and control matrix that outlines all VAT Team, VAT operational, Finance operational risks and controls and who owns and operates them including frequency of testing the controls. Documented Processes - Ensure all VAT processes and workflows are written down and documented. Real-Time Disclosure - Discuss all complex transactions with HMRC before filing your VAT return. Audit Trail - Ensure there is a robust audit trail for all transactions and manual adjustments for VAT . Note: A "Low Risk" rating is not permanent. HMRC can withdraw it immediately if a serious breach occurs or if the business enters into a tax avoidance scheme.

Israel VAT Guide - VAT rates, VAT on goods and services, digital services, e invoicing, reverse charges, input VAT deduction and more. Israel - VAT VAT in Israel is administered by the Israel Tax Authority which was established in 2004. Sales The standard VAT rate in Israel is 18% and is applicable and applied to most goods and services at bought and sold in Israel including the importation of goods from outside Israel and on services purchased from outside Israel where reverse charge VAT is applicable and payable by the customer. There is no VAT registration threshold in Israel and you are obliged to register as a dealer if you sell goods or provide services although you can be classified as an exempt dealer if annual turnover is lower than 120,000 NIS and you open an exempt dealer file online, via a local representative or physically visiting the local tax office with the appropriate documents. The export of Goods and Services is Zero Rate for VAT purposes. Non resident online vendors selling digital services to residents in Israel need to register for VAT locally by using a representative. The basic tax point for goods is when the goods are delivered regardless of when consideration or cash is received for the goods. To alleviate cash flow for small businesses with a turnover that does not exceed 2M NIS, they will be required to pay VAT on receipt of the proceeds of sale. (However if an invoice is issued, then the VAT on the invoice must be included in the figures reported for VAT. Purchases and VAT Recovery Input VAT (VAT incurred on purchases) and paid on imports is deductible from VAT owed on sales provided the input VAT is incurred for business purposes and is directly attributable to taxable sales. (standard and zero rated) Input VAT incurred in relation to supplies of exempt goods or services is not deductible. Input VAT incurred prior to VAT registration is deductible provided it is and can be proved that it was incurred and used for the establishment of the business. For more information on how VAT is applied and the Tax Authority rules, please see the link below to the Israel Tax Authority website. Link below for more information guide to the new VAT dealer Source ITA

Bad Debt Relief is a HMRC process whereby VAT amounts invoiced to your customers and paid to HMRC can be recovered after the debt has been oustanding for 6 months. Introduction Bad debt relief allows a business to claim a refund of the output tax they have paid to HMRC when they do not receive payment from their customers. A refund can only be claimed when all the conditions have been met and must be repaid if the claimant subsequently receives payment from their customer. The relief is two-sided, in that the recipient of the supplies which have not been paid for is required to repay input tax claimed. When businesses make taxable supplies and include VAT on their invoices, they have to pay the output VAT to HMRC on their next VAT return regardless of whether they have actually received or collected the amount invoiced (including the VAT) from their customers. If it turns out that a customer cannot pay for the goods or services a business has invoiced them for, then this creates a problem as the output VAT has been paid to HMRC but the cash has not been received from the customer to fund this payment. This can create cash-flow problems especially where the amounts involved are significant. Bad Debt Relief In the event of the above situation, where debts become irrecoverable, HMRC will allow businesses to make bad debt relief claims to recover the output VAT they have paid but not recovered from the client. To be able to make a claim for Bad Debt Relief, businesses must satisfy a number of conditions. Note: Where customers have recovered the input VAT from HMRC that was invoiced by their supplier, this will have to be repaid. Conditions That Have to be Met to claim Bad Debt Relief The debt is over six months old. The debt has been written off in the refunds for bad debt account. The claimant has a separate refunds for bad debt relief account (which may be maintained outside normal accounting systems) containing the following information: The outstanding amount to which the claim relates. The period in which the tax was accounted for and paid to HMRC. The amount of bad debt relief claimed. The period in which the claim was made. The amount of VAT chargeable on each supply Any payment received for the supply The date and number of each invoice issued; if no invoice has been issued the supplier must detail the date, the name of the purchaser and the nature of the supply The debt is over six months old. The debt has been written off in the refunds for bad debt account. The claimant has already accounted for and paid the tax being reclaimed, via a VAT return or assessment. The value of the supply concerned cannot exceed the open market value. Time Limits for Making a Claim A claim for bad debt relief must be made within four years and six months of the later of the following: The date when the amount became due and payable; and The date of the supply. Other Key points Regarding Bad Debt Relief Claims Where Bad Debt Relief claims have been made and the customer subsequently settles the debt and VAT, then any VAT reclaimed using Bad Debt Relief will need to be repaid to HMRC. A debt cannot be written off in the refunds for bad debt account until six months from the date when the debt became due and payable. Who Can Make a Bad Debt Relief Claim The Individual or company who made the supply in the first place The new owners of a business that was transferred as a going concern where the new business owners have taken over the same business VAT registration number and there were existing bad debts of historic sales. Bad Debt Relief Exclusions No entitlement to Bad Debt Relief if value of supply is greater than the open market value Debt has been factored to a third party Bad debt relief is not available to businesses that use the cash accounting scheme or one of the retail schemes that allow the daily takings total to be adjusted for opening and closing debtors. Where import agents have paid import VAT on their customer’s behalf and are then not paid by their customers, there is no entitlement for the agent to claim bad debt relief in respect of the unpaid import VAT. (If the agent is not paid for the services he provides there may be an entitlement to bad debt relief subject to all conditions being met). Relief from VAT on bad debts (VAT Notice 700/18) -Contains public sector information licensed under the Open Government Licence v3.0. VAT - Bad Debt Relief - Guide on HMRC Bad Debt Relief Process to Recover VAT

UK Tax Rates: Corporation Tax, Income Tax, Inheritance Tax and VAT UK - TAX Rates Corporation Tax Rates Rate 2024/25 Main Rate 25% Small Profit Rate 19% Marginal Rate 26.50% Capital Gains Tax Rates Asset 2024/25 Residential Property 25% Other Assets 19% Investment Trust 28% (Carried Interest) * Tax Free Allowance £3,000, £1,500 Unit Trusts VAT Rates Rate 2024/25 Standard Rate 20% Reduced Rate 5% Zero Rate 0% Income Tax Rates Band Taxable Income Tax Rate Personal Allowance upto £12,570 0% Basic Rate £12,570 - £50,270 20% Higher Rate £50,271 - £125,140 40% Additional Rate £125,140 and above 45% Inheritance Tax Rates Band Taxable Income Tax Rate Tax Free Threshold £325,000 0% Taxed Above £325,000 40% Personal Savings Allowance Income Tax Band Personal Savings Allowance Basic Rate £1,000 Higher Rate £500 Additional Rate £0 Tax on Dividends Income Tax Band Tax Rate Over the Allowance Basic Rate 8.75% Higher Rate 33.75% Additional Rate 39.35% * Dividend Allowance TY 2024 /2025 = £500 Stamp Duty Land Tax (SDLT) Property Value SDLT Rate 0 to £125,000 0% £125,001 to £250,000 2% £250,001 to £925,000 5% £925,001 to £1,500,000 10% £1,500,001 and above 12%

Disbursements and VAT - Read our Guide on what are disbursements and the HMRC rules and key conditions that apply before costs can be considered a s disbursements. Introduction Disbursements are payments made to suppliers by a business on behalf of its customers and then recharged back to their customers when they invoice them. VAT registered businesses can treat such payments as disbursements for VAT purposes and thus not charge VAT on these costs when billed on to clients. This is on the basis that they are acting as their customers agent and simply making payment for services on their behalf. To be able to do this, a business must ensure they meet the conditions listed below: You paid the supplier on your customers behalf and acted as an agent for your customer Your customer received, used or had the benefit of the goods or services you paid for on their behalf It was your customer’s responsibility to pay for the goods or services, not yours You had permission from your customer to make the payment Your customer knew that the goods or services were from another supplier, not from you You show the costs separately on your invoice You pass on the exact amount of each cost to your customer when you invoice them The goods and services you paid for are in addition to the cost of your own services It’s usually only an advantage to treat a payment as a disbursement if the supplier didn’t charge VAT, or if your customer can’t reclaim the VAT. Note: If a suppliers invoice contains your customers details (Name and address), then you cannot recover any of the VAT as it is not your input VAT. So if a customer asked you to purchase a web hosting service on their behalf and the above conditions are met, then this would be a disbursement for VAT What is not a Disbursement Normal business costs incurred while providing services to customers (postage, Taxi Travel, Airline tickets) and then recharged on to customers etc are not disbursements for VAT purposes as the expenses are for the businesses use and not the customer. If these costs are recharged, then VAT must be added to the invoice to the customer even where the business originally incurred VAT on those costs. So in effect the gross cost (cost incurred including 20% VAT) will be recharged to the customer plus an additional 20 % VAT levied for the direct supply to the customer. -Contains public sector information licensed under the Open Government Licence v3.0. Disbursements and VAT - Guide HMRC Rules and Conditions

Financial Services and VAT- Explore the different Products and Services and their respective VAT Treatment. Financial Services - VAT Introduction Most Financial Services are Exempt from VAT under the VAT Exemption but there are some services that are not covered by the Finance Exemption and as such are charged at the Standard Rate of VAT when supplied in the UK. For a complete list of Financial Services products and their VAT liability in the UK or non UK, please see our VAT liability page link below. Financial Services VAT Liability Matrix. VAT Law UK VAT law is contained in the Value Added Tax Act 1994, which is referred to in this notice as the VAT Act. Services that, although connected to financial services, are not themselves exempt: bookkeeping services - Standard rated VAT applies when supplied in the UK debt collection and credit control - Standard rated VAT applies when supplied in the UK depository and trustee services - Standard rated VAT applies when supplied in the UK equipment leasing - Standard rated VAT applies when supplied in the UK executor and trustee services and the administration of estates - Standard rated VAT applies when supplied in the UK investment, finance and taxation advice - Standard rated VAT applies when supplied in the UK management consultancy - Standard rated VAT applies when supplied in the UK merger and take-over advice - Standard rated VAT applies when supplied in the UK portfolio management - Standard rated VAT applies when supplied in the UK registrar services - Standard rated VAT applies when supplied in the UK safe custody and safe transportation services - Standard rated VAT applies when supplied in the UK service companies’ activities, for example administration, payment of salaries and wages - Standard rated VAT applies when supplied in the UK the issue by a bank of a note payable to bearer on demand (but taxable at the zero-rate valuation of assets - Standard rated VAT applies when supplied in the UK assessing the direct tax liabilities of a holding - Standard rated VAT applies when supplied in the UK investment analysis - Standard rated VAT applies when supplied in the UK market sector research share consultancy - Standard rated VAT applies when supplied in the UK general financial or investment advice - Standard rated VAT applies when supplied in the UK accountancy services - Standard rated VAT applies when supplied in the UK tax and legal advice - Standard rated VAT applies when supplied in the UK supplying a draft prospectus - Standard rated VAT applies when supplied in the UK Where these services merely form one element of the service being provided, it will be necessary to look at the whole service being provided in order to determine the correct supply position and the liability of that supply or those supplies. Single or multiple supply Certain financial services, such as the provision of intermediary and sub-contracted ‘outsourced’ services, can constitute a number of component services that, if supplied separately, may have different VAT liabilities. In order to establish the correct liability of such packaged services you may need to apply certain tests to ascertain the overall liability of your supply. You can find further information in the HMRC VAT Supply and Consideration manual (VATSC80000) Outsourced services If you provide sub-contracted (or ‘outsourced’) services to a supplier of exempt financial services, such as a bank, the liability of your supply depends on the nature of the service you perform. It does not become exempt simply because your customer uses your service in making its own exempt supplies. You must determine the exact nature of your supply. For it to be exempt, it must, when viewed broadly, form a distinct whole, fulfilling the essential functions of a supply described within the finance exemption set out in the VAT Act, Schedule 9, Group 5 Input tax You are entitled to deduct the input tax incurred that you use or intend to use in making taxable supplies. You cannot normally deduct input tax where this relates to exempt supplies (although special rules apply to supplies of financial services made to persons located outside the UK and EU. If your input tax relates to both taxable and exempt supplies, you can normally deduct only the amount of input tax that relates to your taxable supplies. You can find further information in HMRC Notice 706 Partial exemption . If you purchase capital items for business use you may need to make adjustments of input tax in subsequent years. Capital items are assets that are capable of being used in your business over a period of years. The items concerned for which adjustments may be necessary include computer equipment, land, buildings and refurbishments. You can find further information on this in HMRC Notice 706/2 Capital Goods Scheme . Financial services made to, or received from, persons belonging outside the UK If you make financial services to or receive them from people who belong outside the UK you should read HMRC Notice 741 and 741A Place of Supply of Services . It explains when you can treat services that are supplied to a person belonging outside the UK as outside the scope of VAT. It also explains how you should account for VAT on the receipt of certain financial services from outside the UK (reverse charge). You should note that not all the finance related services mentioned in HMRC Notice 741 Place of Supply of Services are exempt from VAT when supplied within the UK. Sorting and counting money When supplied on their own the following are taxable: carriage of cash re-stocking of cash machines and sorting or counting of money This is because the services being applied to the money are the same as those that could be applied to any type of goods that can be counted, packed, delivered, collected and reconciled. Services that include an element of making payments or transfers between bank accounts are exempt. Where a supply has a mixture of taxable and exempt elements, its overall character will determine the liability. Certain supplies of bank notes The first issue, by the bank of issue, of Bank of England, Scottish and Northern Irish banknotes is zero-rated. This provision overrides the exemption allowed for dealings with legal tender banknotes. Payment services for household bills If you accept over-the-counter payments for household bills and charge for the service, your supply is exempt. Dealing with numismatic and investment coins If you sell bank notes or coins, whether or not they are legal tender, as: collectors’ pieces investment articles items of numismatic interest your supply is normally taxable on the full selling price, whether or not they are sold for more than their face value. Examples include: bank notes proof coins Maundy money precious or base metal coins However, if you make supplies of collectors’ items of numismatic interest, you may be able to use the special scheme explained in Notice 718 Margin Scheme for second-hand goods, works of art, antiques and collectors’ items. Sales in some gold coins are exempt as investment gold. Further information is provided in HMRC Notices 701/21 Gold and 701/21A Investment gold coins . Foreign exchange transactions Foreign exchange transactions are normally exempt supplies. If you act as principal, then the consideration is the net result of your transactions over a given period of time plus any fees or commission charged. However circumstances may arise where you enter into a foreign exchange contract that does not provide for a consideration in any form. In this instance there may not be a supply for VAT purposes. For further information please see HMRC VAT Finance Manual (2740) . Clearing and settlement services A service supplied by a clearing-house for settling indebtedness between members is an Exempt supply. Automated Teller Machines (ATMs) The provision of an ATM and software Supplies of an ATM itself or the software required to run it are both taxable (Standard Rated), whether or not the consideration is based on the ATM’s use. ATM replenishment Services provided in connection with the routine operation of an ATM, including filling with cash, maintenance and repair, are taxable (Standard Rated) supplies. Convenience, interchange and reciprocity fees ATM providers sometimes make charges that are described as convenience fees, interchange fees or reciprocity fees. Where the charge is for: the facility to obtain money the provision of money transaction processing the operation of accounts the supply is exempt. Site rental The granting of a right to permanently attach an ATM to the ground, or for its incorporation into the fabric of a building, is an exempt supply unless the grantor has elected to waive exemption. Further guidance can be found at section 2 of HMRC Notice 742 Land and property . Current, deposit and savings accounts Many of the charges made by banks, building societies or similar organisations in connection with the operation of a current, deposit or savings account will be exempt. Exceptions include charges made for: the issue of certain types of financial certificate (for example, audit and balance certificates supplied to third parties) the extra cost of special printing or overprinting of cheque books and paying-in books Please note that the above list is not exhaustive. Charges made for dishonoured cheques or direct debit payments As either a bank or a supplier of goods or services, you may charge your customers, because: they have failed to honour their cheques or direct debit payments and, if you are the supplier, you have borne the cost of bank charges If you are a bank making such a charge to your customer, the charge will be a part of your overall service for running the customer’s account and will be exempt from VAT. If you are a supplier making such a charge to your customer, the charge will be outside the scope of VAT. Banking Services Provision of information on the state of the client’s accounts by the bank providing the electronic banking services, bank statements, the transfer of funds and the debiting and crediting of accounts. These services are Exempt. Provision of information on share prices, foreign exchange rates, balances on accounts with other financial institutions. These services are Standard Rated. Hire of equipment which can be used for other purposes (for example where the link gives access to Bloomburg). These services are Standard Rated. Sale of equipment. These services are Standard Rated. Deductions from pay If, as an employer, you charge for deductions from the pay of your employees for items such as: insurance premiums mortgage repayments union subscriptions your supply is exempt. Securities for money A security for money can be described as a document under seal or under hand for consideration containing a covenant, promise or undertaking to pay a sum of money. Securities for money are not restricted to a specific type of document: examples include bills of exchange, financial guarantees and promissory notes. The issue of a security for money is exempt. Travellers’ cheques The issue or encashment of travellers’ cheques is exempt. Loans, granting of credit and advances If in the course of your business for a consideration you: supply credit advance money in the form of loans provide overdrafts or other advances your supply is exempt. The charge you make for a loan, advance or credit facility is usually described as interest. The value of the exempt supply in the grant of credit or loan is the gross interest or other sum received, but not the repayment of capital loaned. Interest received on money deposited is consideration for an exempt supply. Instalment credit finance This type of credit is usually advanced in connection with the supply of goods, and may be under a hire purchase, conditional sale or credit sale agreement. The provision of instalment credit in these situations is exempt where a separate charge is made for the facility of instalment credit and disclosed to your customer. If this condition is satisfied, the supply of credit is exempt and the supply of goods taxable, the value being the cash price stated in the agreement before any deposit or any part exchange value is deducted. If you do not satisfy this condition, the full amount paid by the customer is consideration for the supply of goods. The full amount of VAT on the goods is accounted for at the time of supply. Usually this is when the goods are delivered, but it may be preceded by any part payment, or the issue of an invoice. Conditional sale, hire purchase and credit sale Conditional sale - means the sale of goods where the price is payable by instalments. The goods remain the property of the seller until the full price is paid or the customer meets another agreed condition. Hire purchase - occurs under an agreement for the hire of goods for periodic payments, where the hirer has the option to purchase. Credit sale - means the sale of goods which immediately become the property of the customer, but the price is payable in instalments. What supplies are not considered exempt credit The provision of the following to your customers are not supplies of exempt credit: Late payment penalties If you do not explicitly allow your customers to defer payment (see paragraph 4.5 ) and impose a penalty because they have not paid by the due date, the penalty is not consideration for a supply and is outside the scope of VAT. Discount for prompt payment If you offer a discount on condition that your customer pays for your supply of goods or services within a specific time, then the VAT value will be based on the actual amount paid by your customer. See HMRC VAT Notice 700: the VAT Guide for further details and invoicing requirements Personal Contract Purchase (PCP) Some Personal Contract Purchase (PCP) or similar contracts may be described as HP. If they contain a contractually optional payment exercisable at the end of the contract, which at the outset of the contract is set at or above the anticipated open market value of the asset at the time the option will be exercised. They are treated as a supply of leasing services. There is therefore no supply of credit and the full value of each instalment is taxable - even if part of the fee is shown as credit in the agreement. Deferred payments You may allow customers to defer payment but make an extra charge for allowing them to do so. If the charge relates to periods before and up to the time of the supply (see HMRC VAT Notice 700: the VAT Guide ) it is not a charge for credit, but is further consideration for the supply of the goods or services. Alternatively where you agree to defer payment beyond the time of supply and make an additional charge for doing so, such a charge will be consideration for an exempt supply of credit. interest charged on the outstanding balance on a card account Credit Cards Interest charged on the outstanding balance on a card account is Exempt Annual membership, joining and subscription charges or charges made by card companies to the cardholder for the issue of the card is Exempt The charge made to merchants (retailers) by credit card companies. This charge usually takes the form of discounts from the amounts the card companies reimburse the merchant is Exempt Joining fees charged to merchants by card companies is Exempt Imprinter/terminal rental charges are Standard Rated The consideration for a sale of goods for example imprinters/terminals in connection with any card scheme is Standard Rated Credit Management Services If you provide credit management, and you do not grant the credit, your supply is taxable. If, on the other hand, you grant the credit and also manage that credit, your supply will be exempt. A supply by a third party of taxable credit management could typically include the following features: credit checking, this includes debt profiling, assessing credit worthiness, electoral roll checks and obtaining references valuation of assets such as property, land, vehicles authorisation services (including those that go beyond just checking the applicant’s signature or agreeing credit or payment within limits set by the person providing the credit) taking decisions on credit applications on behalf of the credit provider creating and maintaining records on behalf of the credit provider in order to enable them to fulfil their legal obligations, such as those relating to credit applications, payments and credit transactions monitoring a payment record or dealing with overdue payments (although read section 5 on debts and related services) The above list is not exhaustive. Provision of outsourced services to a loan provider If as a business you provide a package of outsourced service to a loan provider that consists of services prior to and after the granting of a loan, your supply to the loan provider is exempt if you provide all of the following services as a central part of that supply: the operation of bank accounts on behalf of the credit provider arranging the transfer of funds to the borrower, and the processing of loan repayments (and any additional charges or fees) by direct debit or cheque Debt collection The supplies made by a debt collection agency, or by someone involved in debt collection, are taxable. Debt collection covers the collection of debts of any nature, even if payment of those debts has been received before, on, or after their due date. Although debt collection service undertaken on behalf of a creditor company may involve some negotiation of the repayment of a debt by the debtor to the creditor this will not be an exempt debt negotiation service. For example if you: issue letters to the debtor on behalf of the creditor demanding payment seek to chase the debt in some other form (for example trying to contact the debtor by phone.) seek to locate a debtor on behalf of the creditor provide accounting services to the creditor (that is you monitor the debtor’s payment account and notify the creditor of any defaulted payments) These services will be taxable (Standard Rate). Any debt negotiation services will be ancillary to the principal service of debt collection. The above list is not exhaustive. Insolvency Practitioner Services The supplies made by an Insolvency Practitioner are normally taxable (Standard Rated) Where an Insolvency Practitioner acts as both nominee and supervisor in any type of formal Voluntary Arrangement then the supplies by the Insolvency Practitioner are exempt Further details on Insolvency Practitioner services can be found in the VAT Finance manual (VATFIN3260). Shares, securities and other financial instruments The issue of securities such as shares, bonds, loan notes, debentures, are not supplies for VAT purposes when the purpose of that issue is to raise capital. This includes the issue of units or shares in an investment fund. Input tax incurred that relates to an issue of shares or other securities will be recoverable to the extent that the issuer’s business activities generate taxable supplies. VAT Finance Manual (4250) provides further details on this. For further guidance on input tax recovery please read VAT Notice 706: partial exemption . Transactions in securities that are already in existence are exempt when they are sold or transferred in the course of a business activity and the normal partial exemption rules apply. Stock lending Stock lending describes a situation where one person, the ‘lender’, transfers to a second person, the ‘borrower’, the legal title, along with all the dividends and rights, to securities. The borrower agrees to return to the lender, at a later date, an equivalent number of the same securities as those received. Stock lending is an exempt supply, the consideration being the fee charged to the borrower. Where stocks are loaned, the borrower who holds legal title receives dividends, which are not consideration for a supply Share underwriting A share underwriter guarantees to buy a proportion of any unsold shares when a new issue is offered to the general public, and usually receives either commission or charges a fee. A share underwriter may also underwrite an issue by agreeing to guarantee that buyers will be found. In either case the supply is exempt. There is not a supply for VAT purposes by the issuer who sells the securities to the underwriter (see paragraph 6.1 ), but there is a subsequent exempt supply by the underwriter when those securities are sold. Nominee services You are a nominee if you hold securities in your own name on behalf of a third party (the beneficial owner). Your services of acting as nominee are exempt. This includes charges for transferring stock from one nominee to another which is seen as an exempt transaction in securities. Custody Services There are 2 types of custody services, safe custody and global custody. Safe custody Safe custody services are taxable (Standard Rated). These services include the provision of the purely physical service of safekeeping, sometimes referred to as safe deposit facilities. A supply of safe custody services is taxable if you, as a business in the UK, contract to supply the service to your client irrespective of whether the securities are held in the UK, an overseas branch of your business or elsewhere. If you lease or hire a specific site to your client rather than provide a service of secure storage within your premises, the supply is in the UK if the site is in the UK, but outside the scope of UK VAT if the site is overseas. You may have to account for VAT in an EU member state if the place of supply is in the EU. Global custody Global custody services are a package of services that may include safe custody, the collection of dividends or interest on securities held, dealing with scrip and rights issues and payment against delivery of stock. This package of services including the safe custody element is exempt. Services of a share registrar Services of a share registrar may include some or all of the following: all aspects of operating company share registers administration of scrip schemes, share option schemes, profit sharing schemes and dividend reinvestment plans arrangements for advertising the closure of the share offer attending shareholders’ meetings and organising polls at such meetings arranging ‘break out’ for bulk nominee accounts capital gains enquiries, and other correspondence and enquiries conversion of loan stock preparation, designation and despatch of certificates, correction of errors on certificates, and issuing of duplicated documents administrative services in relation to mergers, placings, rights issues, reorganisations and acquisitions processing forms of proxy registration of grants of probate regular reports on share movements administrative services in relation to savings plan schemes This list is not exhaustive. The liability of a share registrar service is taxable at the standard rate of VAT. Listing fees charged by regulatory bodies Fees charged by regulatory bodies, such as the Financial Services Authority, for listing companies that wish to float on an exchange are outside the scope of VAT. Fees charged by stock exchanges Many exchanges charge fees to their members for admission to the exchange, as well as market maker charges, transaction charges and exchange charges. Basic admission or membership charges are taxable at the standard rate, with the place of supply being where the recipient belongs following changes to the place of supply rules introduces on 1 January 2010. The liability of other charges depends on exactly what is being done by the exchange for the charge. If the service is not an intermediary service (see section 9 ) then the fee will be taxable at the standard rate. Arranging the issue or placement of securities If you arrange the issue or placements of securities, whether as offers for sale, rights issues, cash offers, vendor placings or bids with underwritten cash alternatives, including the service of co-ordinating an issue when a number of participants are involved in the share or other placings, your service is exempt. The provision of advice is taxable (Standard Rated) Execution only services If you supply execution only services, for example, buying or selling securities on your client’s instructions, but do not offer advice on securities, your supply is exempt. Dealer systems / Trading Platforms Many transactions in securities are effected by electronic means. If you operate a dealing system that allows a user to insert a bid and offer quotes for securities, another user to insert an acceptance and for the system to match and sell deals, your supply of the dealing system is exempt, but only where you run that system. Data services If you: lease or sell software, or the system itself provide electronic data services that simply provide subscribers with a message facility or an information service, for example on share price movements or financial news your service will be taxable (Standard Rated). -Contains public sector information licensed under the Open Government Licence v3.0.

Read our guide on how VAT is applied to electricity and gas for domestic, charitable and businesses uses including exemptions, climate change levy (CCL) and much more Introduction The term fuel and power generally refers to Gas, Electricity and Oils supplied to either Business es (non domestic), Domestic (residential) or mixed use (both business a nd domestic) customers for consumption . VA T Rates of VAT 20% VAT (Standard Rated) 5 % Reduced Rate VAT (Note the Government has announced that VAT will be cut from 5% to 0% from 1 Oct 2026 for 6 Months) 5% De minimis (where consumption is below 33kWh per day / 1000kWh per month for Electricity and 145kWh per day and 4397kWh per month for Gas Zero Rated Outside the Scope = No VAT Reduced - Rated Supplies The reduced rate of VAT applies to supplies of fuel and power for qualifying use. Section 3 explains what qualifying use means. The following supplies are considered qualifying use: fuel and power for domestic use (read paragraph 3.2) fuel and power for charity non-business use (read paragraph 3.3) fuel and power where the amount supplied does not exceed the small quantities, called the de minimis limits The reduced rate applies to: disconnection and re-connection of the supply and special meter readings at the instigation of the supplier installation by a supplier of liquefied petroleum gas of a bulk gas tank regarded as essential to the supply of liquefied petroleum gas installation of check meters installation or replacement of lines and switchgear belonging to the electricity supplier installation tests and re-tests where required by the supplier to protect their equipment maximum demand and minimum guarantee charges removal of damaged coins or tokens from meters rental charges for meters, including secondary meters used by landlords to apportion charges between their tenants rental of a bulk gas tank in conjunction with the supply of liquefied petroleum gas to that tank repair, maintenance or replacement of equipment and gas pipes or electric cables (belonging to the supplier) up to and including the consumer’s meter, (where the supplier’s conduits are within the fabric of a building, reduced rate supplies by the supplier are limited to work essential for getting at the conduits, and making good, all consequential work is standard-rated and contractors’ supplies to the supplier are standard-rated) replacing a credit meter with a pre-payment meter under the supplier’s Code of Practice, or replacing or re-siting by a supplier of their meter at their instigation replacement of mains fuses and provisions of earthing terminals standing charges Note: Any of these supplies are standard-rated when supplied by a contractor other than the supplier of fuel and power. If a supplier instructs a contractor to send a bill direct to a consumer for work that would have been at the reduced rate if invoiced by the supplier, the contractor must charge the consumer VAT at the standard rate. Supplies from sub-contractors to suppliers of fuel and power are not eligible for the reduced rate of VAT. Standard Rated Supplies These supplies are standard-rated: wholesale supplies of fuel and power matches any road fuel gas or hydrocarbon oil on which excise duty is chargeable hire of mobile generators for operation by the customer repairs, maintenance and replacement of pipes not belonging to the fuel or power supplier, normally those on the consumer’s side of the meter servicing contracts other than supplies of insurance sale of meters to commercial, industrial and domestic consumers for their own use altering coin mechanisms of secondary meters services in connection with tests carried out, for example, at the request of estate agents or prospective purchasers of premises replacement of meters not under the supplier’s Code of Practice and re-siting meters at the request of the consumer diverting mains to meet local authority requirements (these supplies are zero-rated when work is carried out in the course of construction of new dwellings) (read Buildings and construction (VAT Notice 708) ) raising or lowering of overhead power lines in connection with the movement of abnormal loads, including escorting the loads (these supplies are zero-rated when work is carried out in the course of construction of new dwellings), read Buildings and construction (VAT Notice 708) ) supply, repair and maintenance of public lighting circuits to local authorities temporary floodlighting, emergency or decorative lighting blast freezing supplies of electricity for recharging vehicles when using charging points situated in public places Tax points for specific types of supply: Utilities (water, gas, electricity and the like) Regulation 86 of the VAT Regulations 1995 Domestic supplies Supplies of water, gas, electricity and the like are treated for VAT purposes as supplies of goods. They are invariably supplied on a continuous basis. For this reason there are special tax point rules under regulation 86 of the VAT Regulations 1995 (see VATTOS2340 ). This limits the tax point for supplies specified in regulation 86(1) to the earlier of the receipt of payment or the issue of a VAT invoice. But see below for details of the tax point rule that can apply in some circumstances where there is a delay beyond one year in issuing a VAT invoice or receiving a payment. Regulation 86 also permits period VAT invoicing in the case of water, gas and electricity (see VATTOS5220 ). Top of page Natural gas and electricity There are special place of supply rules for natural gas and electricity (and also heat and cooling) under which wholesale supplies involving buyers and sellers located in different countries are taxed in the country in which the purchaser is located. For more information about this see the manual covering the place of supply of goods, VATPOSG . Under these arrangements the VAT is accounted for by the purchaser as a reverse charge. In the UK this is provided for under section 9A of the VAT Act 1994. Regulation 82A of the VAT Regulations 1995 (see VATTOS2325 ) establishes the tax point as either the date of payment or, in the case of non-monetary consideration, the last day of the VAT accounting period in which the goods are removed or made available. Zero Rated Supplies of Energy Saving Materials from 1 May 2023 to 31 March 2027 The relief applies to the services of installing energy-saving materials in residential accommodation and charitable buildings. For example, where a customer employs a business to install energy-saving materials that the customer purchased directly from a retailer. The relief also applies to the supply of energy-saving materials by the person who installs those materials in residential accommodation and charitable buildings. For example, where a customer employs a business to supply and install energy-saving materials. However, if you supply energy-saving materials without installing them your supply will be standard-rated. For example, the sale of energy-saving materials by a retailer is always standard-rated. Residential Accommodation The relief for energy-saving materials applies to installations in residential accommodation. This includes: houses, blocks of flats or other dwellings armed forces residential accommodation children’s homes homes providing care for the elderly, disabled people, or people who suffer or have suffered from drug or alcohol dependency or mental disorder hospices institutions that are the sole or main residence of at least 90% of their residents monasteries, nunneries and similar religious communities residential accommodation for students or pupils self-catering holiday accommodation caravans used as a place of permanent habitation (such as a park home or static caravans sited on a permanent residential caravan park) houseboats that are designed or adapted for permanent habitation and have no means of self-propulsion, or other boats which are used as a person’s sole or main residence, such as canal boats and Dutch barges, on which the boat owner pays Council Tax or domestic rates Note - The standard rate applies to the installation of energy-saving materials in hospitals, prisons or similar institutions, hotels or inns or similar establishments. Buildings intended solely for relevant charitable purposes From 1 February 2024, the relief has been extended to include buildings intended for use solely for a relevant charitable purpose. Use for a relevant charitable purpose means use by a charity in either or both the following ways, namely: otherwise than in the course or furtherance of a business as a village hall or similarly in providing social or recreational facilities for a local community If you install energy-saving materials in such buildings, you should take reasonable steps to ensure that your customer will use the building for a relevant charitable purpose and retain the appropriate documentation. For example, you might ask your customer to provide you with a letter confirming the intended use of the building. Zero Rated Supplies Draught Stripping - strips that are fixed around windows, interior and exterior doors, and loft hatches to reduce draughts. Insulation - meaning materials that are designed and installed because of their insulating qualities and includes insulation for walls , floor, ceilings , roofs or lofts , water tanks, pipes or other plumbing fittings. Note - the relief does not apply to products such as curtains and carpets which are not usually installed simply as insulation. Solar Panels - including all systems that are installed in, or on the site of, a building and that are solar collectors such as evacuated tube or flat plate systems, together with associated pipework and equipment, such as circulation systems, pump, storage cylinder, control panel and heat exchanger , photovoltaic (PV) panels with cabling, control panel and AC/DC inverter. Installation of Wind Turbines in residential accommodation from 1 May 2023 (and in charitable buildings from 1 February 2024) to 31 March 2027 is zero-rated. This includes the installation of all equipment essential to the operation of wind turbines, including mounting poles, electrical cables, battery banks and voltage controllers. After 31 March 2027, the reduced rate will apply to installations in residential accommodation and buildings used solely for a relevant charitable purpose in the United Kingdom. Water Turbines - f rom 1 May 2023 to 31 March 2027, the installation in residential accommodation, of water turbines, together with the installation of all equipment essential to the operation of water turbines, including electrical cables, battery banks and voltage controllers is zero-rated. From 1 February 2024 to 31 March 2027, the installation of water turbines, in buildings used solely for a relevant charitable purpose is zero-rated. This includes the installation of all equipment essential to the operation of water turbines, including electrical cables, battery banks and voltage controllers. After 31 March 2027, the reduced rate will apply to installations in the United Kingdom. Ground source heat pumps - benefit from the zero rate of VAT. These transfer energy from the natural heat stored in the earth to heat the home and domestic hot water. They can also be used to augment existing heating systems in the same way as solar panels. From 1 February 2024 to 31 March 2027, the relief also includes preparatory work that is necessary for the installation of a ground source heat pump. The term refers to groundworks, or dredging of a body of water, carried out to install pipework or other equipment necessary for the operation of a ground source heat pump. Air Source Heat Pumps - use the air as a source of heat. They absorb heat from the outside or surrounding air and transfer that into useable heat in the home for space or water heating, or both. Fixed air source heat pumps can be reversed so that they can draw heat from inside a building, thus providing cooling during the summer as well as indoor heating for colder periods of the year. Only air source heat pumps that are permanently fixed and are not portable or moveable qualifies as energy-saving materials. HMRC’s understanding is that most air conditioning units are air source heat pumps. However, in cases of doubt, deciding if any particular product is to be treated as an air source heat pump will depend on the facts of each case. Micro Combined Heat and Power Units - These produce heat and hot water but, in addition, they also generate electricity. Wood-Fuelled Boilers - These are boilers designed to be fuelled solely by wood (including wood chips and pellets), straw or similar vegetal matter. Some boilers need hoppers to feed the fuel into the boiler. Where a hopper is integral to the installation of the boiler it’s included within the scope of the reduced rate in Northern Ireland and zero rate in Great Britain. The standard rate applies to installations of ‘multi-fuel’ or ‘dual-fuel’ boilers which are designed to burn other non-renewable fuels such as coal or oil as well as wood. Stand-alone wood-burning stoves are also standard-rated. Note - The construction or conversion of buildings or extensions for use as log or fuel stores is standard-rated. Water Source Heat Pumps - These transfer energy from natural heat stored in a body of water. They can also be used to augment existing heating systems in the same way as solar panels. From 1 February 2024, the supply of dredging of a body of water, in order to install pipework, or other equipment, necessary for the operation of a water source heat pump, qualifies for the zero rate. Where such dredging is carried out by the installer of a water source heat pump (at the same time as the installation) they normally fall to be ancillary and form part of a single zero-rated supply. Batteries for storing energy converted from electricity - From 1 February 2024, electrical storage batteries installed in residential accommodation or buildings intended for use solely for a relevant charitable purpose qualifies for the temporary zero rate. These include the retrofitting of a battery for storing electricity generated by one or more of the microgeneration systems including solar panels, wind turbines and water turbines (listed above), batteries installed as part of the installation of a microgeneration system normally fall to be ancillary and form part of a single zero-rated supply, the installation of a standalone battery for storing electricity from the grid (the mains electricity) , the installation of a battery for storing electricity from one or more of the microgeneration systems and from the grid. Smart diverters - From 1 February 2024, the retrofitting of a smart diverter to one or more of the microgeneration systems installed in residential accommodation or buildings intended for use solely for a relevant charitable purpose qualifies for the temporary zero rate. A smart diverter automatically diverts electricity generated by one or more microgeneration systems to electrical appliances in the accommodation or building, including other microgeneration systems such as ground and air source heat pumps. Where a smart diverter is fitted as part of the installation of a microgeneration system it will normally fall to be ancillary and form part of a single zero-rated supply. Other Energy Efficient Products The installation of all other energy-efficient products, such as energy-efficient boilers , secondary or double glazing, low-emissivity glass, or energy-efficient fridge freezers, are Standard-Rated, unless grant funded and in which case maybe Zero Rated. For more information read - (Energy-saving materials and heating equipment (VAT Notice 708/6) ) Grant-Funded Installations of Heating Equipment Reduced-Rated Installations The reduced rate applies to the grant-funded installation of certain heating appliances , central heating and renewable source systems in the sole or main residence of a qualifying person. This includes the price of the equipment itself. The reduced rate only applies to the extent that the supply is grant-funded (read section 3.9). However, if the supply is also an installation of energy-saving materials in residential accommodation, from 1 May 2023 to 31 March 2027, it qualifies for the zero rate, as explained in section 2. If you supply heating equipment without installing them your supply is standard-rated, even if it’s grant-funded. A qualifying person is a person who receives a grant for the installation of heating appliances (read section 3.2) or for the installation, maintenance or repair of a central heating system (read section3.3) or for a renewable source heating system (read section 3.4) and either: is aged 60 or over receives one or more of the following benefits: Disablement Pension Housing Benefit Income-based Jobseeker’s Allowance Income Support War Disablement Pension Working Tax Credit Disability Living Allowance Council Tax Benefit Child Tax Credit (other than the family element) If there are 2 or more people living in a dwelling, and one person is a qualifying person and the other residents are not, the reduced rate will apply if the supply is to the qualifying person, and they’re eligible for the grant. Heating appliances The reduced rate applies to the installation of: closed solid fuel fire cassettes electric dual immersion water heaters with factory-insulated hot water tanks electric storage heaters gas-fired boilers gas room heaters with thermostatic controls oil-fired boilers radiators Central Heating Systems The reduced rate applies to the installation, repair and maintenance of a boiler, radiators, pipework and controls forming a central heating system. This includes micro combined heat and power systems, which are heating systems that also generate electricity. The reduced rate includes repairs and replacements of such equipment, whether or not the original system was installed under a relevant grant-funded scheme. Renewable source heating systems The reduced rate applies to the installation, repair and maintenance of renewable source heating systems. This means space or water heating systems which use energy from: renewable sources, including solar, wind and hydroelectric power near renewable sources, including ground and air heat Connection or Reconnection to the Mains Gas Supply Where a qualifying person (see section 3.8) has been disconnected from the mains and re-connection is paid for under a grant scheme, that reconnection is eligible for the reduced rate. Leasing Arrangements Under some grant-funded schemes, a leasing arrangement may be used to help fund the installation of a central heating system. Where this happens, the installer will install the central heating system as usual, but they’ll sell the boiler and radiators to a leasing company. This supply is standard-rated. The leasing company, which will then own the goods, will make an annual lease charge to the qualifying person, which will be paid by grant funding. This supply is taxed at the reduced rate. Where a leasing arrangement is used to help fund the installation of a central heating system, the following 2 payments may become due (besides the lease charge): termination fee — this is payable by the qualifying person or their landlord if the qualifying person moves to a new house during the 7-year lease period end of lease payment — the qualifying person must make a final payment to the lease company at the end of the lease period Both of these are further payments for the lease of the equipment and are eligible for the reduced rate. Connecting Dwellings to Mains Power With effect from 1 January 2012 the treatment of one-off charges for the first time connection to gas and electricity is as follows: if the supply of the connection and provision of the utility is made by the same person (or by members of the same VAT group) the connection charge will follow the treatment of the utility and be reduced-rated if the supplies are not made by the same person or if at the time of connection, the supplier of the utility has not been determined, the connection charge will continue to be standard-rated (irrespective of who eventually provides the utility) the first time connection of a new dwelling or relevant residential or relevant charitable building to the gas or electricity mains supply is zero rated under group 5 of schedule 8 to the VAT Act 1994 if the connection is made as part of the construction of the building (read Buildings and construction (VAT Notice 708) ) works in connection with the means of providing fuel and power as part of the renovation or alteration of empty residential premises, or of the conversion of premises to a different residential use may be reduced-rated under group 6 and group 7 of schedule 7A to the VAT Act 1994, if performed on the immediate site of the premises (read Buildings and construction (VAT Notice 708) ) grant-funded connection or reconnection to a mains gas supply relating to a qualifying person’s sole or main residence is reduced-rated under Item 4 to group 3 of schedule 7A to the VAT Act 1994, (read Energy-saving materials and heating equipment (VAT Notice 708/6) ) Customer Types Residential = non business customer = 5% reduced rate VAT charge Business = customer where fuel and power is used to run a business = 20% VAT Standard Rate or 5% where usage is de minimis. Mixed Use = customers where there is business use and also residential use at the same premises. If mixed use (domestic use) is less than 60% then the customer will be charged 20% Standard Rate VAT for the business use portion and 5% reduced rate for the domestic use portion. Where mixed use (domestic) is 60% or more, then the customer will be charged 5% reduced rate VAT on their total bill. Charities = Non business charities = 5% Reduced Rate Electric Car Charging VAT is applied at 20% where electric cars are charged at public charge points. (Note this was challenged by Charge My Street with Tax assistance from Deloitte and the UK's First Tier tribunual (FTT) ruled in Feb 26 that 5% VAT should be applicable where a customer does not exceed 1000 kwh usage per month). HMRC has appealed this decision. For electric cars charged at buildings designated as businesses, 20% VAT will be applicable subject to the normal de-minimis consumption threshold, where 5% VAT is applicable if this is not exceeded. The legislation for the reverse charge for electricity has been designed to exclude supplies of electricity made under supply licences (supply electricity). It also excludes resale supplies of electricity made between the person holding the supply licence and the person making the supply to the consumer of the electricity (the vehicle user). This means that the reverse charge does not apply to the supply of electricity at a charging point for electric vehicles. This is because either the vehicle user is not VAT registered, or because it is not a wholesale supply. This applies whether or not the electricity is supplied at a public charging point. Mixed Use - Certificates I f you supply fuel and power for mixed use (domestic and business use), you should obtain a certificate from your customer that declares what percentage of the fuel and power that you supply to each premises is, or will be, put to a qualifying use. Your customer must provide a separate certificate for each supply of fuel and power to separate premises. The following information should be shown on the certificate: your name and address your customer’s name, address and VAT registration number the address of the premises your supply relates the amount of qualifying use expressed as a percentage of the total use, always give an exact percentage a declaration given by a responsible officer or official of your customer as to the truth and accuracy of the facts given, this should include: the signature name position of the person giving the declaration the date on which it is made an endorsement that the customer has read and understood the guidance and that they know they must notify the supplier if there is a change in the qualifying use Your customer should retain a copy of the certificate and related calculations, schedules and any other relevant documents, so that we can see these if required. Anyone providing an incorrect certificate may be liable to a financial penalty. Where a customer has not furnished a certificate, it is natural for a supplier to charge VAT at the standard rate on the supply. However, it is not uncommon for customers to react by issuing a backdated certificate to the supplier. In such circumstances, we accept the supplier may agree to adjust the VAT. However, this is a commercial decision between the supplier and the customers. Where a supplier agrees to adjust the VAT, then any adjustment will be subject to the normal rules on errors and adjustment. Backdated certificates are also acceptable for climate change levy purposes subject to normal rules. Climate Change Levy (CCL) N on residential customers are required to pay the Climate Change Levy (CCL) as part of their bills for the industrial and commercial supply of taxable commodities for lighting, heating and power in the following sectors of business: agriculture industry commerce public administration other services Taxable commodities are: coal and lignite (brown coal) electricity petroleum and hydrocarbon gas in a liquid state coke, and semi-coke of coal or lignite natural gas as supplied by a gas utility petroleum coke Note: The levy does not apply to taxable commodities used by domestic consumers, or by charities for non-business use. Supplies of small amounts of energy (de minimis) are also excluded. The value of a supply for VAT purposes will include Climate Change Levy where appropriate. Therefore CCL is added to the normal charges prior to calculating the VAT amount. Climate Change Levy Reliefs and Special Treatments GOV.UK https://www.gov.uk › government › publications › exci... Wholesale Supplies of Gas & Electricity Domestic Reverse Charge Supplies of Electricity and Gas where the supply is B2B and intended for onward resale = Domestic Reverse charge procedure applies. Customer Accounts for VAT. Subject to certain exceptions the reverse charge applies to all wholesale supplies of gas and electricity between counterparties established in the UK. This means wholesale supplies between UK counterparties under trading contracts (for example European Federation of Energy Traders contracts, Grid Trade Master Agreements and National Balancing Point contracts) and over the counter or spot contracts of gas, where it’s gas supplied through a natural gas system situated within the UK or any network connected to a natural gas system in the UK, or electricity. Examples of specific supplies or charges covered by the reverse charge are: balancing mechanism imbalance settlement charges, and other gas balancing or gas reconciliation charges services supplied under a wholesale or trading contract that are ancillary to the supply of gas or electricity gas loaded onto road trucks and delivered at a flange linked to liquid natural gas storage facilities, that is, the gas is still within the natural gas system or a network connected to it shipper to shipper metering correction charges where the consumer has changed supplier Supplies to power stations and combined heating and power plants will only be included in the reverse charge where they’re made by way of trading rather than for consumption only. Services not covered by the Domestic Reverse Charge The reverse charge will not apply to supplies of gas and electricity made under supply licence or metered arrangements to domestic and business premises (supplies for consumption). VAT-registered businesses that do not resell or trade the gas or electricity will not be affected. Unless the supply is incidental to a reverse charge supply, the reverse charge will not apply to supplies: of Liquified Natural Gas delivered ‘ship-to-ship’ of natural gas liquids (ethane, propane butane and condensate) sold separate to the sale of gas made by an accredited feed in installation currently zero-rated, for example trades on terminal markets to third party intermediaries and directed utilities for consumption by the directed utility or onward supply by the directed utility to an end user for consumption that are contracted for separately from wholesale supplies of gas and electricity, for example transportation services and of biomethane where they’re from a production plant with a registered capacity of no more than 4,000 metres cubed per hour Further examples of specific supplies or charges not covered by the reverse charge include: distribution use of system charges transmission network use of system charges metering rental charges data collection charges balancing system use of system charges interconnector capacity charges gas storage charges gas network system charges payments made in respect of constraint contracts with National Grid balancing and settlement code charges (Elexon market operator charges) Levy Exemption Certificates traded separately from the underlying electricity Renewable Obligation Certificates (ROCs) traded separately from the underlying electricity — read paragraph 3.8 for the reverse charge for ROCs traded separately fees for exchange related settlement for example N2Ex fees option premiums This is not a full list. Power Purchasing Agreements - Electricity Supplied Sales of electricity made under a PPA or similar agreement may or may not be subject to the reverse charge depending on their wholesale features. Electricity sold under such an agreement will not be regarded as wholesale and so will not be subject to the reverse charge where all of the following apply: the seller of the electricity is a generator who’s exempted from holding a generating licence the generation capacity by asset is 100 megawatts or less the generated volume is not allocated to the generator’s production account with Elexon (or the generator account with the Single Electricity Market Operator (SEMO) in Northern Ireland) Similarly, if your generated power is sold under a PPA or similar agreement to the NFPA, NFPA Scotland Ltd or NFPA Services Ltd and the generated power is not allocated to your production account with Elexon or generation account with SEMO, that power is excluded from the reverse charge. The sale of the power by the NFPA by auction is also excluded from the reverse charge. Emission Allowances Only those compliance market credits which can be used to meet obligations under the EU Emissions Trading Scheme (EUETS) are subject to the reverse charge mechanism. These currently comprise of EU Allowances, as defined in Directive 2003/87/EC (as amended). Some Certified Emission Reductions (CERs) and some Emission Reduction Units (ERUs), as defined in the Directive, were also subject to the reverse charge. As from 1 May 2021, these CERs and ERUs are no longer within the reverse charge. At the beginning of 2021 a new UK Emissions Trading Scheme (UKETS) was introduced. This broadly follows the EUETS and an amendment was made to the scope of the reverse charge so that it applies to UK allowances from 1 May 2021. Reverse Charge Treatment for Utilities Utility companies are suppliers of gas, electricity, water, telephone or internet services to homes and businesses, or a business (including the corporate group) that supplies such services. They’re likely to be regulated or working under legislation administered by the Office of Gas and Electricity Markets (Ofgem), the Water Services Regulation Authority (Ofwat), or the Office of Communications (Ofcom). Construction services received by utility companies, will be eligible for exclusion from the reverse charge under the end user exemption, if: the utility company confirms to the supplier in writing that it is an end user the work is being carried out during construction, repair or alteration of the utility companies own assets — for example part of their own infrastructure for delivering power, water of whatever utilities they are responsible for If a utility company charges for work to connect, disconnect, reconnect, divert, ‘make safe’ or ‘cap off’ parts of its own utility network, this work is generally not within the scope of ‘construction services’ for the purposes of the reverse charge. This is because they are not making onward supplies of construction services. Normal VAT rules will apply to any such charges. Services provided by utility businesses which also do not fall within the domestic reverse charge include: Provision of a connection to a utility network, or diversionary works to allow the relocation of the network Development and construction of a private network to be owned by the utility and leased or sold to the customer Work that is not within the scope of the Construction Industry Scheme, such as the installation of a boiler (and ancillary supplies) Exceptions to this will be when a utility company takes on the role of contractor for particular projects such as: constructing, repairing or maintaining a private power or gas network for a customer installing full heating systems End User Exclusions when supplying to Public Bodies The end user exclusion will usually apply to supplies to public bodies. Most supplies will either be: related to works to the public body’s property and land provided to the public body so it can discharge its responsibilities under a special legal regime If the public body is acting on a commercial basis, and selling on the construction service, the end user exclusion will not apply. The public body will receive a reverse charge supply and have to account for the VAT to HMRC. It will also have to establish the end user status of its customer to determine whether to charge VAT or apply the reverse charge in respect of its onward supply. -Contains public sector information licensed under the Open Government Licence v3.0. Fuel and Power and VAT

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