Value Added Tax (VAT)

Introduction to VAT

VAT is a tax that’s charged on most goods and services that VAT-registered businesses provide in the UK. It’s also charged on goods and some services that are imported from countries outside the European Union (EU), and brought into the UK from other EU countries.

VAT is charged when a VAT-registered business sells to either another business or to a non-business customer. When VAT-registered businesses buy goods or services they can generally reclaim the VAT they’ve paid.

There are three rates of VAT, depending on the goods or services the business provides. The rates are:

• standard – 20%
• reduced – 5%
• zero – 0%

There are also some goods and services that are:

• exempt from VAT
• outside the UK VAT system altogether

How your VAT bill is calculated.

The amount of VAT owed to or from HMRC is the difference between the input and output VAT on goods and services provided.


Output VAT – This is the amount of VAT you have charged on goods or services provided to your clients / customers

Input VAT – This is the amount of VAT that you paid to on goods or services that you have brought into your business for the purpose for reselling

For more information on the different rates of VAT and what goods and services are charged at, the Reduced/Zero rate and for those that are exempt from the VAT system please visit HMRC or Contact us.