Eeny-meeny...
Zero-rated, lower-rated, standard rated, exempt – sometimes VAT can seem like a game of chance. A recent change of policy by HMRC illustrates how much sense it can all make.
Years ago, domestic power was zerorated. They put it up to 8% to pay for the abolition of the poll tax (that many years ago), then cut it back to 5%. But they allowed connection charges to remain zero-rated.
They’ve now decided that this isn’t right – maybe the European Commission has come knocking. So if you get a plumber or an electrician to connect you to the mains, that will be standard rated. Except... if you pay the power company to do it, it’ll be treated as incidental to the gas or electricity, and the same rate will apply to everything – 5%.
And if you’re having a new house built, new houses are zero-rated anyway, and the connection charges will be part of that.
If you are having difficulty telling which rate of VAT should apply to what you do, we’ll be happy to advise you.