Page 27 - F1 Integrated Workbook STUDENT 2018

Features of Taxation and the Regulatory Environment

Therefore, supplies could be:

Standard Rated – Taxed at the standard rate of VAT

Higher Rated – Taxed at a higher rate

Zero Rated – Taxed at a rate of 0% (Basic food, e.g. bread)

Exempt – Not subject to VAT

In the UK, supplies such as food, children’s clothing and exports are zero rated for
the purpose of VAT. Businesses who sell zero rated sales are allowed to claim back
input VAT on purchases.

Alternatively, in the UK, supplies such as finance and insurance are exempt for the
purpose of VAT. Businesses who make exempt sales cannot claim back input VAT
on purchases.

You will not be required to know the types of goods and services that are zero rated
or exempt for the exam; the examiner will make this clear in the question.

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