Generally speaking VAT registered business have to charge 20% VAT on all supplies (sales) that they make.  For certain categories of supplies (e.g. energy saving for residential property) the reduced rate of 5% applies.  For yet other goods (e.g. most uncooked food) the zero rate applies.

When supplying another VAT registered business, the VAT charged doesn’t change the price.  The buying business can usually claim back any VAT charged.  VAT is a tax on consumption not a tax on business.

An area that often sparks confusion is when supplying a charity.  Many charities operate in ways similar to a business.   However usually they are not VAT registered because they are not in business.  This means they cannot reclaim VAT on their purchases.

Charities are entitled to VAT relief on certain purchases of goods and services, but the conditions can be complex and eligibility declarations or certificates are often issued in error.  If you supply a charity you need to check the correct position, and charge VAT unless you are sure there is an exemption.  Don’t take the charities word for it if they say you don’t need to charge VAT.  You could end up with a hefty bill from HMRC if it turns out you should have charged VAT but didn’t.

As with all of our tax tips and web pages this information is necessarily summarised and of a general nature.  If you would like detailed specific advice please contact us.