In this section:
- Products and services where you have to charge VAT
- VAT on discounts, vouchers and special offers
- VAT on incidental expenses to clients; disbursements
- Dealing with VAT when goods are returned
- Which transaction should go on which VAT return?
Products and services where you have to charge VAT
If you are registered for VAT, you must charge VAT on all VATable supplies of goods and services that you make. 'Supplies' include day-to-day sales as well as other supplies such as the sale of business assets, items sold to employees and goods you take out of the business for your personal use.
VAT is payable on the full value of any supplies made, even if no VAT was charged to the person or business who received the goods or services.
If you receive goods or services as full or part payment, you must account for VAT on the full value of the item sold, rather than the amount that you charged the buyer.
You do not need to account for, or pay VAT on, one-off free gifts provided the value of those gifts does not exceed £50.
On this page:
- VAT is charged on sales and other supplies
- Examples of items where VAT is chargeable
- Where there is no VAT chargeable
- More useful links
VAT is charged on sales and other supplies
If you are registered for VAT, you must charge VAT on all VATable supplies of goods and services that you make. If you buy or receive something from someone who is registered for VAT, they must charge you VAT on all VATable supplies they make to you.
'Supplies' include day-to-day sales and advance payments as well as other supplies such as the sale of business assets, items sold to employees and goods you take out of the business for your personal use.
VAT is chargeable on the full value of any supplies made, even if no VAT was charged to the buyer or user of the goods or services.
Examples of items where VAT is chargeable
When pricing, costing, estimating or supplying any type of products or services, you should ask yourself 'should I charge VAT?'
In addition to charging VAT on the goods and services that you supply to your customers, you must account for and pay VAT on:
- items sold to staff, such as canteen meals or via vending machines
- sales of business assets, such as commercial vehicles or machinery
- hiring or loaning of goods to someone else
- commission received from selling something on behalf of someone else
- goods or services, such as products or computer software, that you or your staff take out of the business for personal use
VAT is also chargeable on barter, part-exchange, gifts and samples.
If you receive goods or services as full or part payment such as barter, or if you receive items in part-exchange, you must account for VAT on the full value of the item sold, rather than the amount that you charged the buyer.
If you give free gifts that are worth more than £50 to someone, or if you give a series of free gifts to someone and the combined value of those gifts exceeds £50, you must account for, and pay the VAT on, the value of the gifts.
If you give a free sample to a person or a business you do not need to account for, or pay VAT on, the value of that sample. However, if you give more than one free sample to a person or a business, you must account for, and pay VAT on, the value of all but one of the samples. If you sell any free samples that you have received from other businesses, you must account for, and pay VAT on, the sales.
Find out more about VAT on discounts, gifts and samples
Find out more about VAT and business entertainment
How to determine the amount of VAT on barter, gifts or samples
You charge VAT on the full value, or the cost, of the goods or services you supply.
Value. Normally you calculate the full value on an item you supply by determining the price, excluding VAT, that a customer would pay in money for the goods or services.
Cost. What it would cost you to purchase the goods, excluding VAT, at the time of the supply. If that cost is not available, you determine the cost based on what it would cost to produce the goods at the time they are supplied.
Where there is no VAT chargeable
You do not have to account for, or pay VAT on the following.
Free samples of goods
If you give a free sample of your goods to another person or business. The sample must be an example of one of your products. Only one virtually identical example of each product can be supplied to one person, unless the samples are given for testing purposes, or given to a client so that they can give several of their customers one of your samples each.
Free loans of business assets
If you make free loans of business assets to your customers. The cost of hiring the asset must be included in the selling price. For example, where you sell tea, coffee, water etc and you provide for 'free' a vending machine for these items and none of your customers pays extra for the machine.
Free goods
If you occasionally give away as gifts or free goods to different people an item from your stock that cost less than £50. There must not be a series or succession of gifts to the same person.
Free services
Genuinely free services that you provide. You must not receive any payment, goods or services in return.
Reclaiming VAT on products and services supplied
More useful links
More about how to calculate VAT on supplies other than normal sales in VAT Notice 700/15
More about VAT on discounts, vouchers and special offers in VAT Notice 700/7
More about goods where you don't charge VAT because the buyer is responsible for accounting for it
