Which supplies are taxed over a higher VAT rate compared to zero rated supplies?

Study for the AAT Tax Processes for Businesses Level 3 Exam with flashcards, multiple choice questions, and detailed explanations. Be prepared and succeed!

The correct choice is based on the understanding of how VAT rates apply to different supplies. Standard rated supplies are subject to the full VAT rate, which is typically higher compared to zero-rated supplies.

Zero-rated supplies are those that do not collect VAT from customers, such as certain food items or basic groceries, making them exempt from VAT charges. On the other hand, standard rated supplies include most goods and services that are not specifically exempt or zero-rated and are taxed at the prevailing standard VAT rate set by tax authorities.

Exempt supplies, while not taxable, do not contribute to VAT revenue, and so they do not compare in terms of a tax rate to zero-rated supplies. Reduced rate supplies are taxed at a lower rate than the standard rate, but still above zero-rated supplies. Input supplies refer to purchases a business makes that may be used to produce goods or services; they do not directly indicate a tax rate applicable to sales.

Thus, standard rated supplies distinctly hold a higher VAT rate than zero-rated supplies, confirming why the choice is appropriate in this context.

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