When Is VAT Not Charged?

VAT is not charged on a transaction if it meets any of the following criteria:

Registration Threshold: The supplier’s taxable turnover is below £90,000 (rolling 12-month period) and they have not registered voluntarily.
Note: This threshold does not apply to Non-Established Taxable Persons (NETPs), who must register for their first UK sale.

Place of Supply Rules: The service or good is deemed to be supplied outside the UK. For most B2B services, the place of supply is where the customer is based.

Exemptions: The specific nature of the supply is exempt by law (e.g., financial services, education, or healthcare).

Zero-Rating: The supply is taxable but the rate is set at 0% (e.g., books, exported goods).

Out of Scope: The transaction sits entirely outside the VAT system, such as statutory fees (MOTs), or non-business activities.

VAT liability is determined by the nature of the supply and the location of the parties, not simply the VAT status of the customer.