What is outside the scope of VAT?
Definition of outside the scope of VAT
Some sales of goods and services are outside the scope of VAT. This means that VAT doesn’t apply to them at all, so if you sell these goods and services, you won’t charge any VAT, and if you buy them, there won’t be any VAT to reclaim.
How is this different from exempt sales and costs?
Exempt sales and costs would still be included in boxes 6 and 7 of your VAT return but in most cases, costs that are outside the scope of VAT would be left out of your VAT return completely. Sales may or may not be included, depending on where your customers are and which VAT scheme you are using.
Examples of goods and services outside the scope of VAT
Charges levied by the government, such as MOT testing, and tolls on bridges that are owned by the state, are outside the scope of VAT. Wages paid to employees are also outside the scope of VAT.
You can find out more about which goods and services are outside the scope of VAT in our guide to VAT rates.