VAT is something many businesses will have to contend with when purchasing items and when attempting to sell them. The UK’s VAT isn’t quite as high as other European countries, but in 2009, the nation suffered a 3.7% consumer inflation bump, and then Chancellor Alastair Darling (pictured) declared that VAT should be restored to 17.5% on a wide range of goods and services.
Similar to a sales tax, the value added tax is a levy tacked on based on estimated value as a product goes from material stage, manufacturing and finally distribution. This tax is ultimately passed on to the consumer, so finding zero-rated items is the ideal for most small businesses. This creates big savings on expenses and, of course, customers appreciate the lower prices.
It’s hard at times to find a proper niche in the market and grab a product that isn’t subject to VAT. This becomes especially difficult when dealing online, as most affiliates are working to sell high-end electronics. However, there are a few products for online businesses not subject to the high VAT.
Let’s look first at print. Books, magazines and newspapers are not subject to VAT. This doesn’t seem like a big group of items if you’re working online, but this category also extends to information products – eBooks, guides, blogs, etc. It would all fall under one of the three forms of print media, thus leaving you able to fairly price items without having to pass the VAT on to your customers.
Online or offline businesses attempting to sell shoes and clothing are subject to VAT unless the clothing is for children. The market may not be as large, but just like with the print media, a business selling children’s clothing could compete with lower prices since they’re not passing the high costs to their customers in order to make a profit.
Food items are also exempt from VAT. Of course, if you were working online as or with a food distributor, you would be subject to high shipping costs, but it’s still far more economical to purchase and sell food than it is items with the VAT attached.
However, not all types of food are zero-rated. Basic meats, vegetables and drinks are labelled for human consumption and are thus exempt from a value added tax. Animal feeds, plants and seeds are also zero-rated. Other items considered “food” are not exempt, though, like confectionary/sugary items, soft drinks and alcoholic drinks.
Other special exempt items include equipment for the disabled. Walkers, wheelchairs and other items disabled peoples use won’t get government sticking their hands in and taking a percentage after every step of the process.
International trade items are also zero-rated. Trade is a staple of the European Union, and they will not attach a VAT to items traded within the EU or items exported to a country outside of the EU.
Depending on who’s providing the items, where they’re provided and how they’re presented for sale, some other items may also have a reduced rate of 5% VAT.