Taxation (UK) · The VAT registration requirements

Taxable Supplies and Taxable Persons for UK VAT

Updated 11 October 2026 · Fact-checked

A taxable supply is a supply of goods or services made in the UK by a taxable person in the course of business, and it is standard-rated, reduced-rated or zero-rated. Exempt and outside-the-scope supplies are not taxable supplies. A taxable person is someone who is, or must be, VAT registered.

Understand Taxable Supplies and Taxable Persons

VAT is a tax on the supply of goods and services. To decide whether VAT applies, you ask two questions. What type of supply is it? And who is making it?

First, the supply. A taxable supply is one that is standard-rated, reduced-rated or zero-rated. The standard rate is 20%. Reduced-rate supplies are charged at a lower rate. Zero-rated supplies are taxable, but the rate of VAT charged is 0%.

Then there are supplies that are not taxable. Exempt supplies are supplies where no VAT is charged and the supplier cannot recover related input VAT (subject to partial exemption rules). Outside the scope supplies are not subject to UK VAT at all, for example a supply made by someone acting purely as a private individual, or wages paid to employees.

Second, the person. A taxable person is an individual, company, partnership or other body that makes taxable supplies and is, or is required to be, registered for VAT. Registration is compulsory when taxable supplies exceed the registration limit of £90,000. Only taxable supplies count towards that limit. Exempt supplies do not.

The key difference between zero-rated and exempt is recovery of input VAT. A zero-rated trader charges 0% but can reclaim input VAT. A trader making only exempt supplies cannot register, so cannot reclaim input VAT in the normal way. That is why zero-rating is usually better for the business.

Key rules to remember

Taxable supplies: Taxable supplies = standard-rated + reduced-rated + zero-rated; Exempt and outside-the-scope supplies are excluded.
Standard rate of VAT: 20%; Given in the tax rates and allowances in the exam.
Compulsory registration limit: Taxable supplies over £90,000; Deregistration limit is £88,000. Both are provided in the exam.
Zero-rated vs exempt: Zero-rated: 0% output VAT, input VAT recoverable. Exempt: no output VAT, input VAT generally not recoverable; Learn this contrast. It is tested often.
VAT-exclusive and VAT-inclusive prices: VAT = VAT-inclusive price × 20/120; VAT-exclusive price × 20%; Use when a standard-rated price is given including VAT.

How to solve Taxable Supplies and Taxable Persons questions

Use this method for any question on whether VAT applies to a supply or a person.

1Identify who makes the supply and whether it is made in the course of business. Private or employment activity is outside the scope.
2Classify each supply: standard-rated, reduced-rated, zero-rated, exempt or outside the scope.
3Separate taxable supplies (standard, reduced, zero) from the rest.
4Total the taxable supplies only. Leave out exempt and outside-the-scope items.
5Compare the total with the £90,000 registration limit, or the £88,000 deregistration limit if already registered.
6State the conclusion: taxable person or not, and whether output VAT is charged and input VAT recoverable.
7If the answer is written, give the reason for each classification in one short sentence.

Quickest way: Three-column sort

When to use it: Use in Section A and OT case questions where several supplies are listed and you must pick the right statement or total.

Draw three columns on your scratch pad: taxable, exempt, outside the scope.
Place each supply in a column. Zero-rated goes in taxable.
Add up only the taxable column.
Compare with £90,000 and answer. Check the question asks for VAT-exclusive values.

Common mistakes in Taxable Supplies and Taxable Persons

Treating zero-rated supplies as exempt.
Both involve no VAT being charged to the customer, so they look the same.
Fix: Remember zero-rated is taxable at 0%, counts towards the registration limit and allows input VAT recovery. Exempt does none of these.
Including exempt supplies when testing the £90,000 limit.
Students add up total turnover instead of taxable turnover.
Fix: Count only standard, reduced and zero-rated supplies.
Saying a trader making only exempt supplies must register.
Confusing high turnover with taxable turnover.
Fix: A person making only exempt supplies has no taxable supplies, so is not a taxable person.
Calling outside-the-scope supplies exempt.
Both are not charged to VAT.
Fix: Outside the scope means VAT law does not apply at all. Exempt supplies are within VAT but relieved from charge.
Applying 20% to a VAT-inclusive price.
Rushing and forgetting the price already includes VAT.
Fix: Multiply a VAT-inclusive price by 20/120 to get the VAT.

Worked examples

Example 1

Ravi runs a business selling children's clothes (zero-rated), books (zero-rated) and adult clothes (standard-rated). In the last 12 months his sales were children's clothes £50,000, books £20,000 and adult clothes £25,000, all VAT-exclusive. He also receives £10,000 rent from letting a flat, which is an exempt supply. Must Ravi register for VAT?

Show the solution

Zero-rated and standard-rated supplies are taxable supplies.
Taxable supplies = £50,000 + £20,000 + £25,000 = £95,000.
The exempt rent of £10,000 is excluded from the test.
Compare £95,000 with the registration limit of £90,000. It is higher.

Answer: Yes. Taxable supplies of £95,000 exceed £90,000, so Ravi must register and becomes a taxable person. Including the exempt rent would give £105,000 but that is not the correct test.

Example 2

Mina sells a standard-rated product for £2,400 including VAT. Her other business makes exempt supplies. Calculate the VAT in the £2,400 sale and explain whether the exempt supplies affect her registration test.

Show the solution

The price includes VAT at 20%, so VAT = £2,400 × 20/120.
£2,400 × 20/120 = £400.
The VAT-exclusive price is £2,000.
Exempt supplies are not taxable supplies, so they do not count towards the £90,000 limit.

Answer: The VAT is £400 and the net price is £2,000. The exempt supplies are ignored for the registration test. Only taxable supplies such as the £2,000 net sale count.

Exam tips

Always check whether figures are VAT-exclusive before comparing them with £90,000.
Write the contrast clearly: zero-rated allows input VAT recovery, exempt does not.
In OT cases, read all five questions first. The same supply list is often used for classification, totals and recovery.
In written answers, name the category of each supply and give a one-line reason.

Practice questions from The VAT registration requirements

Taxable Supplies and Taxable Persons in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Taxable Supplies and Taxable Persons: frequently asked questions

What is the difference between zero-rated and exempt supplies?

Zero-rated supplies are taxable at 0%, so they count towards registration and the trader can recover input VAT. Exempt supplies are not taxable, so they do not count towards registration and input VAT is generally not recoverable.

What is a taxable person for UK VAT?

A taxable person is someone who makes taxable supplies in the course of business and is, or must be, registered for VAT. This can be an individual, partnership, company or other body.

Do exempt supplies count towards the VAT registration limit?

No. Only taxable supplies count. These are standard-rated, reduced-rated and zero-rated supplies. The limit is £90,000.

What does outside the scope of VAT mean?

It means the supply is not covered by UK VAT at all, for example employees' wages or a private sale outside any business. It is different from exempt, which is a supply within VAT but relieved from charge.