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, sales and costs that are outside the scope of VAT would be left out of your VAT return completely.
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.
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FreeAgent's Chief Accountant Emily Coltman is available to answer your questions in the comments.