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VAT rate Explained

Like it or not, Value Added Tax is part of or daily lives and there is hardly anything that we buy or sell that VAT does not apply to in the UK. But what exactly does a company have to do to reclaim VAT that they have paid? And what exactly is the current VAT rate in the UK?

Current VAT Rates

Since January of 2011, the standard VAT rate in the UK has been set at 20%. This was significantly higher than the 17.5% in the preceding years and caused quite a stir when introduced. Once introduced, retailers in the UK became responsible for apply ing the 20% VAT rate on all products that are sold. The current VAT rate does not affect the customer however as all display prices are legally required by law to be inclusive of VAT. Some retailers then prefer to keep their prices low and so take the hit on VAT themselves in a bid to boost their custom.

There are certain designations for products that have varying rates of VAT applied to them. These categories are zero-rated, reduced rate (where VAT is rated at 5%) and the standard rated which is charged at 20%. Reduced rate VAT is applied to certain products deemed as necessities by government. These include home heating fuels, energy saving materials such as insulation and boilers, products to aid ex smokers from relapsing, cylcling equipment and children's safety equipment.

You can get a more comprehensive summary of all things VAT related at www.gov.uk/vat-rates and on the HMRC website.

VAT on Imported Vehicles

When importing a vehicle into the UK you are required to pay VAT on the car, any accessories with the car and also on the delivery charges. You must inform HMRC of the new car arriving within 2 weeks via a Notification of Vehicle Arrivals (NOVA) form and they will then apply the appropriate VAT rate. This works in reverse also though as when you export a vehicle form the UK you will be entitled to get some form of VAT relief.

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