Zero-rated sales must be counted
If your business is not VAT registered, you should keep an eye on the value of your cumulative sales, to check that total doesn’t creep over the VAT registration threshold. That threshold is now £83,000 for 12-months’ worth of turnover, but what categories of sales should be counted towards it? The simple answer is: all business sales could be subject to VAT. The confusing thing is that some items carry VAT at zero (0%) and other goods and services are exempt from VAT. The exempt items should not be counted as part of the turnover when testing whether the registration threshold has been reached, but the zero-rated items must be included.
Food and books are two of the most common categories of products which are subject to VAT at 0%, but there are always exceptions that may catch you out. For example, food purchased to be consumed in a café is subject to VAT at 20%, and e-books generally carry VAT at 20%. You can see that the VAT rules quickly become complicated. This is especially true for retail businesses which supply hot and cold food to eat in and take out.
We can help you check that your business stays within the VAT tram-lines and does not become derailed by zero-rated or exempt VAT items.