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Vat and Children's Clothing: Fur Hats

By CronerTaxwise

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My client is a clothing retailer and sells clothing for both adults and children. The childrens’ range includes a rabbit fur skin hat. My client zero-rates supplies of childrens’ clothing but has heard that supplies of clothing with fur skin on should be standard rated. Is this correct?

In general sales of childrens’ clothing are zero-rated but some items are excluded and are therefore standard rated:

Articles designed as clothing or footwear for young children and not suitable for older persons are zero rated (VATA 1994, Schedule 8, Group 16, item 1).

‘Clothing’ includes hats and other headgear (VATA 1994, Schedule 8, Group 16, Note 1).

Item 1 does not include articles of clothing made wholly or partly of fur skin, except:

• headgear

• gloves
• buttons, belts and buckles
• any garment merely trimmed with fur skin unless the trimming has an area greater than one-fifth of the area of the outside material or, in the case of a new garment, represents a cost to the manufacturer greater than the cost to him of the other components

(VATA 1994, Schedule 8, Group 16, Note 2).

‘Fur Skin’ means any skin with fur, hair or wool attached except:

• rabbit skin

• woolled sheep or lamb skin; and
• the skin, if neither tanned nor dressed, of bovine cattle (including buffalo), equine animals, goats or kids (other than Yemen, Mongolian and Tibetan goats or kids), swine (including peccary), chamois, gazelles, deer or dogs.

(VATA 1994, Schedule 8, Group 16, Note 3).

As your client is selling hats made of fur skin it first appears that they should be standard rated. However, because they are made from rabbit skin which is excepted from standard rating, the hats qualify for zero-rating.