Zero-rated and VAT-exempt products or services & your invoices

Beyond the standard 20% VAT on products and services, there are two additional tax rates: 5% and 0%. These apply only to specific items or types of services.

Does your business work only with products or services that fall under the zero-rated VAT in the UK? Or do you sell a selection of items that are zero-rated? In either case, there are important things to keep in mind when it comes to your invoicing.

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In addition to the three VAT rates, there’s another option: VAT-exempt. Some products and services are considered VAT-exempt. A business can also be considered VAT-exempt if it sells only VAT-exempt goods or services. In this case, they would not be eligible to register for VAT and would not submit VAT returns to HMRC.

VAT-exempt products/services in the UK

You likely are already aware that zero-rated is very different from VAT-exempt. The primary difference of concern is that for VAT-exempt items, no VAT should be included in your invoicing.

VAT-exempt products/services include:

Sports and physical education activities
Fundraising events for charitable organisations
Moorings for houseboats
Insurance transactions

As you can see, while there might be some discernible trends for determining whether a product or service is VAT-exempt, the range is vast and if you’re uncertain about whether your business deals with sales of a product or service that is VAT-exempt, it’s best to check with a tax professional.

Invoicing as VAT-exempt

If you’re a VAT-exempt business creating invoices for VAT-exempt items, there shouldn’t be any mention of VAT on your invoices.

If you’re using invoicing software like SumUp Invoices, you can easily disable the VAT in your profile settings. This will automatically remove the VAT option from your invoices.

Products/ services that are 0% VAT

The sales that require 0% VAT to be reflected on the invoice cover a broad range of different types of products and services. These include, for example:

Printing of brochures, leaflets, or pamphlets
Publishing books or magazines
Sale of children’s clothing & footwear
Sale of protective helmets for cycling or construction
Construction on property for charitable purposes

These all fall under products/services that do require that you list the VAT, even though it’s 0%. This means that it will still be reflected in your VAT Returns.

Creating invoices with zero-rated VAT products/services

If your invoice includes items or services that have a VAT rate of 0%, the right invoicing software makes it easy to create, send and manage invoices with this rate.

With SumUp Invoices, there’s no need to do anything except select 0% from the VAT drop-down menu on the invoice template. As long as you have VAT activated in your profile settings, this option will appear automatically.