When may a business not need to charge VAT on its supplies?

A business may not need to charge VAT on its supplies for several key reasons, including when it is supplying exempt items, zero-rated items, or if it is not VAT registered.

Exempt supplies are those that are not subject to VAT at all, meaning businesses that only make exempt supplies do not charge VAT to their customers and cannot reclaim any input VAT on expenses related to those supplies. Zero-rated supplies are taxable supplies but are charged at a VAT rate of 0%, allowing businesses to charge no VAT while still being able to reclaim input VAT. Additionally, if a business is not VAT registered because its taxable turnover is below the VAT registration threshold, then it is not required to charge VAT on its supplies, irrespective of the nature of those supplies.

The other options present situations that do not generally result in a business being exempt from charging VAT. For example, market value thresholds and transaction limits are not standard criteria for VAT liability. Instead, exemptions and zero-rating depend more explicitly on the nature of the goods or services and the VAT registration status of the business. Thus, the best answer accurately reflects the circumstances under which a business may forgo charging VAT.