VAT

Here we explain what needs to be done with VAT.

What you need to do with VAT

VAT stands for Value Added Tax – This tax is placed on a product or service, whenever value is added. It is usually, therefore, included in the selling price of almost every good or service sold in the UK.

Because you will be interacting with both customers and suppliers, there are two types of VAT you need to consider: The tax included on things you sell to your customers – called output tax; and then the tax included in the price on things you buy from your suppliers - called input tax.

You don’t owe HMRC money for both - only the output tax - the proportion of the gross selling price that relates to VAT. The input tax – the proportion of the gross buying price that relates to VAT - can be claimed back.

VAT is usually paid (or re-claimed) as a net figure (output tax - input tax), to HMRC, quarterly (i.e. once every three months)

Records you will need to keep

Tax Document 1:

• Quarterly VAT Return

More Information

More about VAT, and the rates on different goods and services, can be found here:

» GOV.UK - VAT