© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
A2: Rate of VAT
Standard rate
- Current rate: 20%
"(1) Subject to the following provisions and to the provisions of section 29A of this section, VAT shall be charged at the rate of 20 per cent and shall be charged—
(a) on the supply of goods or services, by reference to the value of the supply as determined under this Act; and
(b)...
(c) on the importation of goods, by reference to the value of the goods as determined under this Act." (VATA 1994, s.2)
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- Treasury power to change rate
"(2) The Treasury may by order increase or decrease the rate of VAT for the time being in force under this section by such percentage thereof not exceeding 25 per cent. as may be specified in the order, but any such order that has not previously expired or been revoked shall cease to be in force at the expiration of a period of one year from the date on which it takes effect, unless continued in force by a further order under this subsection.
(3)In relation to an order made under subsection (2) above to continue, vary or replace a previous order, the reference in that subsection to the rate for the time being in force under this section is a reference to the rate which would be in force if no order under that subsection had been made." (VATA 1994, s.2)
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Rate applies to value of supply/value of goods
"(1) Subject to the following provisions and to the provisions of section 29A of this section, VAT shall be charged at the rate of 20 per cent and shall be charged—
(a) on the supply of goods or services, by reference to the value of the supply as determined under this Act; and
(b)...
(c) on the importation of goods, by reference to the value of the goods as determined under this Act." (VATA 1994, s.2)
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Exemption, zero-rating and reduced rate​
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- Supply both exempt and zero-rated: zero-rating prevails
"[37] In the course of the hearing in your Lordships' House a question was raised as to item 4 of Group 6 in Schedule 9 to VATA 1994, which provides for the exemption (subject to certain conditions) of "the supply of any goods or services (other than examination services) which are closely related to a supply of a description falling within item 1 (the principal supply) [that is, education]." This raises the possibility that the written materials (if they had constituted a separate supply at all) might be both zero-rated and exempt. In such a case zero-rating trumps exemption, because of the wording of section 30(1) of VATA 1994: see the judgment of Millett LJ in Commissioners of Customs & Excise v Wellington Private Hospital Ltd [1997] STC 445, 449. But Mr Sherry (for the College) disavowed any reliance on item 4 of Group 6 and in the circumstances it is unnecessary to go into the complications of EC Commission v United Kingdom [1988] ECR 817 as explained by Millett LJ in the Wellington case." (College of Estate Management v. HMRC [2005] UKHL 62)
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