Compact Services

  2004 Budget - Value Added Tax

Rates of tax

The standard rate of VAT remains 17.5%, or 7/47 of the consideration received for making a supply.

A lower rate of 5% (or 1/21 of the gross receipt) applies to supplies including domestic fuel and power, installation of energy saving materials in houses, and some conversions of residential property.

A zero rate applies to a range of supplies including most food, books, new houses, and children's clothes.

Certain other supplies are exempt, which means no tax is charged to the customer, but the supplier cannot recover VAT on costs. These include many land-related supplies, insurance, finance, education, health and welfare, and non-profit sports clubs.


An unregistered business must register if it has made £58,000 of taxable supplies in the last 12 months, up to any month end, or if it expects to make £58,000 of taxable supplies in the next 30 days.

A registered business can deregister if it can satisfy Customs that taxable supplies in the next year will not exceed £56,000.

Small businesses with taxable turnover of up to £150,000 can opt to use the new 'flat-rate scheme'. A single rate, which varies with the type of business, is applied to all receipts, and no VAT is claimed on costs. The single rate is lower than 7/47 to compensate for lost input tax.

Small businesses with taxable turnover of up to £660,000 can use the cash accounting scheme (only paying VAT to Customs when customers have paid) and annual accounting scheme (filing a single VAT return each year instead of one every three months).

Scale charge for private use of fuel paid for by business

  Petrol Petrol Petrol Diesel Diesel Diesel
  Month Quarter Year Month Quarter Year
0 - 1400cc £65.54 £197.45 £791.49 £61.28 £183.83 £736.18
(11.46) (34.55) (138.51) (10.72) (32.17) (128.82)
1401cc - 2000cc 82.56 249.37 1,000.00 61.28 183.83 736.18
(14.44) (43.63) (175.00) (10.72) (32.17) (128.82)
over 2000cc 122.56 367.66 1,472.35 77.45 232.35 931.92
(21.44) (64.34) (257.65) (13.55) (40.65) (163.08)

The figures are the net 'supply' and (in brackets) the VAT on it.

Returns and payments

Most VAT returns are prepared for three-month periods, and they are due (with any payment) by the end of the next month.