VAT (Value Added Tax)

VAT has decreased to help tackle to financial downturn

Value Added Tax or VAT is a charge made by the Government on consumer spending. That means that most goods and services in the UK are taxed at the standard rate which is 17.5%. (Correct at 01 Jan 2010)  Domestic fuel and power are charged at a reduced rate of 5%. Some things are zero- rated (that means that you are not charged VAT on them) such as children's clothing or exempt from VAT such as insurance.

Apart from the added costs, VAT is not something you will probably have to worry about. It is more of a concern to people running businesses. If you are planning to set up a business of your own you should seek advice on how you pay your VAT bills from HMRC. Contact details for Customs Offices >>

These are situated in most cities and staff there will be able to advise you free of charge. You can also seek help from professional accountants.

VAT National Advice Centre including the phone number of their helpline >>

You might find it useful to use some of the basic VAT guides produced by HMRC which can be downloaded online >>

VAT if you are running your own business

Self-employed people may have to pay VAT. The amount you pay back to HM Revenue & Customs (the Government department responsible for collecting it) is the amount you have received on the supply of goods and services minus the amount you have paid from getting goods and services. If you have paid out more than you have received, you should be able to get a rebate.

There are also special VAT schemes for some types of business.

For more information have a look at the list of HMRC website guides which you can download online >>

VAT National Advice Service - Phone no 0845 010 9000 and Textphone service on 0845 000 0200

Claiming back VAT for overseas visitors

If you are an overseas visitor from a non-EC country or you have friends or family visiting the UK who will return to a non-EC country, it is possible to claim the VAT back on things you buy and take home.

To do this you must use shops which take part in the Retail Export Scheme. Not all shops take part in the scheme.. You will see a sticker which says Tax Free Shopping in the shop window. If you are not sure, ask a sales assistant if they can fill in a VAT refund document when you buy something. This is the document you need to claim your VAT back.

Some sales assistants will tell you that a till receipt with the shop's VAT number is all you need to claim back VAT. This is not true. If the shop can't offer you a VAT refund document you won't get VAT back.

When you buy the goods the retailer will ask you for proof that you are entitled to use the scheme. You will normally be asked to produce your passport although you may be asked for another form of identification. They will then ask you to fill in a simple refund form.

There are strict conditions on who can use the Retail Export Scheme. As an overseas visitor you can use the Scheme if:

• An overseas student - if you are studying in the UK you can use the scheme only if you are leaving the EC for a minimum period of 12 months - this will typically be at the end of your study period;
• your place of residence is not in the EC (although you may qualify if you are leaving the EC for at least 12 months);
• you intend to leave the UK for somewhere outside the EC with the goods by the last day of the third month following the month when you purchased the goods e.g. goods purchased on 1 Sep must be exported by 31December you produce the VAT refund form and receipts together with the goods to Customs at your point of departure from the EC.

The scheme does not apply to:

• mail order goods including those purchased over the internet;
• goods for consumption in the EC - for example, perfume which is wholly or partly consumed in the EC;
• goods needing an export licence

For more information on the scheme contact your local VAT National Advice Service on 0845 010 9000 (Textphone service on 0845 000 0200)

If you are disabled, you might also be interested in reading guidance on the Directgov website about VAT reliefs for disabled people >>