{"id":1340,"date":"2025-02-20T07:12:44","date_gmt":"2025-02-20T07:12:44","guid":{"rendered":"https:\/\/iquk.iceglobal.co.uk\/?p=1340"},"modified":"2025-05-13T07:13:38","modified_gmt":"2025-05-13T07:13:38","slug":"an-explanation-of-value-added-tax-vat","status":"publish","type":"post","link":"https:\/\/iqualifyuk.com\/an-explanation-of-value-added-tax-vat\/","title":{"rendered":"An explanation of Value Added Tax (VAT)"},"content":{"rendered":"\n

Value Added Tax, or VAT as it is usually called, was introduced in the UK in 1973 as a tax in common across the European Union (EU) countries. It is charged on the value added to goods and services and is administered by HM Revenue and Customs (HMRC). In the UK all businesses with a turnover (from April 2015) of more than \u00a382,000 per tax year (of everything sold which isn\u2019t VAT exempt) must be registered for VAT with HMRC. The turnover figure is normally increased annually in the budget. Once registered the VAT registration number must be quoted on the company\u2019s invoices and other business documents.<\/p>\n\n\n\n

They have changed over the years, but there are currently three rates. These are standard (20%), reduced (5%) and zero (0%). In addition some goods and services are exempt or are outside the system.
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Examples of goods and services in the different rate categories<\/h2>\n\n\n\n

Standard rate = drinks, biscuits, chocolate, electrical goods, delivery charges, food consumed on the premises, etc.<\/p>\n\n\n\n

Reduced rate = children\u2019s car seats, utilities (domestic electricity, gas, fuel), smoking cessation products etc.<\/p>\n\n\n\n

Zero rate = bike helmets, books, canned and frozen food, children\u2019s clothes, food (eggs, fish, fruit, meat, poultry, tea, coffee, salt, sandwiches), prescription medicines, public transport fares, newspapers, magazines etc.<\/p>\n\n\n\n

Exempt = antiques, burials, cultural events, education, financial services, health services (doctors, dentists, opticians), membership subscriptions, gambling, sports activities<\/p>\n\n\n\n

Outside = goods and services sold outside the EU, goods and services supplied by an unregistered supplier, statutory charges (eg MOT, congestion charge), tolls (public owned bridges, roads, tunnels), charity donations etc.<\/p>\n\n\n\n

The full list is available at www.gov.uk\/guidance\/rates-of-vat-on-different-goods-and-services<\/a>.<\/p>\n\n\n\n

Businesses pay the amount of VAT collected on sales (output tax) less the amount of VAT charged to them (input tax) on all taxable supplies bought in. If the amount of input tax is greater that the output tax then the business claims a refund of the difference from HMRC. The business pays the tax due (assuming it is not claiming a refund) through submitting a VAT Return.
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VAT Returns<\/h2>\n\n\n\n

A business usually submits a VAT Return to HMRC every 3 months. This period of time is known as the \u2018accounting period.\u2019<\/p>\n\n\n\n

The Return records things for the accounting period such as:<\/p>\n\n\n\n