Supported VAT categories

FreeReconcile handles UK VAT categorisation automatically. Here's how we determine the right treatment for each receipt.

Standard rate (20%)

Applied to purchases from UK-based suppliers where VAT is charged. This covers most business expenses from UK companies.

Reverse charge

Applied to services purchased from suppliers outside the UK, typically SaaS products and digital services. Common examples:

• Stripe (Ireland)
• OpenAI (US)
• Adobe (Ireland)
• AWS (Luxembourg)
• Notion, Figma, Linear, etc.

FreeReconcile detects these automatically based on the supplier's country and the nature of the service.

Exempt

Applied to purchases that are VAT-exempt by nature:

• Insurance premiums
• Bank charges and interest
• Professional subscriptions (some)

Zero-rated

Applied to purchases that are taxable but at 0%:

• Books and e-books
• Children's clothing
• Most food items

Out of scope

Applied to items that are outside the UK VAT system entirely:

• Salaries and wages
• HMRC tax payments
• Dividends

How FreeReconcile decides

We look at the supplier name and country, the invoice details, and the nature of the expense. If we're not sure, we flag it for your review rather than guessing.