What is UK VAT? – a brief and simple note!

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VAT is the most complex tax in the UK.

VAT (value added tax) is similar to a sales tax. It is a tax that is charged on most goods and services provided by VAT registered business in the UK. It is also charged on some goods and services imported from countries outside the EU and brought into the UK from other EU countries.

UK VAT is charged when a company registered for VAT sells to either another business or a non-business customer. This is called output tax.

When a UK VAT registered, business buys goods and services they can generally reclaim the VAT (input vat) they have paid on those services. An individual or non-VAT registered business cannot do this.

Do you need to be VAT registered?

If your turnover is more than £70,000 then registration is obligatory. A business may however choose to register for VAT even if turnover does not reach the threshold.

As part of our setup package, we register our clients for VAT if required. Most international clients will want to be UK VAT registered even if they never reach the obligatory threshold in order to be able to reclaim back the VAT on their expenses.

How much is UK VAT?

There are three rates of UK VAT   

  • Standard - currently 17.5% (due to rise to 20% on 4 January 2011). This rate applies to most goods and services
  • Reduced - 5% this rate is charged on fuel and power for instance
  • Zero - for example on books and magazines

Some goods and services are

  • Exempt from VAT
  • Outside the UK VAT system

Too simple a summary? Get in touch for specific advice regarding your own or your clients circumstances or see our more detailed note in our VAT section of our website.


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