Key facts
- Outside-the-scope items are not VAT supplies at all.
- They do not appear in your VAT Return boxes (except Box 7 in some cases).
- Common examples: wages, dividends, donations, statutory fees.
- Do not confuse with “exempt” — outside-the-scope is a different concept.
What Does “Outside the Scope” Mean?
Outside-the-scope transactions are not supplies of goods or services for VAT purposes. They sit completely outside the VAT system and are not reported on your VAT Return.[1]
Common Outside-the-Scope Items
- Wages and salaries (not a supply)
- Dividends (return on investment, not a supply)
- Gifts and donations (no consideration)
- Insurance claims (compensation, not a supply)
- Statutory fees (court fees, MOT fees)
- TOGC — Transfer of a Going Concern (business sales that qualify)
- Council tax and business rates
- Interest on bank deposits (in most cases)
- Loans to employees
Outside-the-Scope vs Exempt
| Outside the Scope | Exempt | |
|---|---|---|
| Is it a VAT supply? | No | Yes (but exempt from VAT) |
| Reported on VAT Return? | Usually no | Included in some boxes |
| Affects partial exemption? | No | Yes |
| Counts towards registration threshold? | No | No |
Transfer of a Going Concern (TOGC)
When you sell a business (or part of a business) as a going concern, the sale is outside the scope of VAT. No VAT is charged, provided the buyer intends to carry on the same type of business.[1]
Frequently Asked Questions
What does outside the scope of VAT mean?
Outside-the-scope transactions are not VAT supplies at all. They sit completely outside the VAT system and are generally not reported on your VAT Return.
What is the difference between outside the scope and VAT exempt?
Exempt supplies are still VAT supplies but with no VAT charged, and they affect partial exemption calculations. Outside-the-scope items are not VAT supplies at all and do not count towards your VAT taxable turnover.
Are wages subject to VAT?
No. Wages and salaries are outside the scope of VAT because paying employees is not a supply of goods or services.
Is selling a business subject to VAT?
Selling a business as a going concern (TOGC) is outside the scope of VAT, provided the buyer intends to carry on the same type of business. No VAT is charged on a qualifying TOGC.
Further Reading
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Sources
- VAT guide (VAT Notice 700) — GOV.UK
- Rates of VAT on different goods and services — GOV.UK