ACCA Applied Skills · Taxation (UK) · The computation of VAT liabilities
Which of the following supplies made by a UK VAT-registered trader is exempt from VAT, rather than zero-rated?
Insurance services are exempt from VAT. Children's clothing, printed books and most food are zero-rated, which means they are taxable at 0%. The difference matters because exempt supplies do not allow input VAT recovery, whereas zero-rated supplies do.
- ASale of children's clothing
- BSale of printed books
- CSupply of insurance servicesCorrect
- DSale of most food for human consumption
Explanation
Insurance is an exempt supply, so no VAT is charged and the related input VAT cannot normally be recovered. Children's clothing, printed books and most food are zero-rated, meaning VAT is charged at 0% and input VAT remains recoverable.
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