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Introduction to liability

Supplies of goods and services which are made by taxable persons in the course of their UK business activities can be subject to one of four VAT liability treatments:

1. •

   standard-rated

2. •

   reduced-rated

3. •

   zero-rated

4. •

   exempt

Standard, reduced and zero-rated supplies are often referred to collectively as ‘taxable supplies’. This distinguishes them from exempt supplies. The distinction between supplies that are taxable and supplies that are exempt is important because of its consequences for input tax recovery. VAT can generally be recovered on costs which are used to make taxable supplies. However, VAT cannot generally