VAT

/ˌvi: eɪ 'ti:ˌ væt/ noun

a tax on goods and services, added as a percentage to the invoiced sales price

● The invoice includes VAT at 17.5%.

● The government is proposing to increase VAT to 22%.

● Some items (such as books) are zero-rated for VAT.

● He does not charge VAT because he asks for payment in cash.

Full form Value Added Tax

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‘…the directive means that the services of stockbrokers and managers of authorized unit trusts are now exempt from VAT; previously they were liable to VAT at the standard rate. Zero-rating for stockbrokers’ services is still available as before, but only where the recipient of the service belongs outside the EC’ [Accountancy]

COMMENT: In the UK, VAT is organised by the Customs and Excise Department, and not by the Treasury. It is applied at each stage in the process of making or selling a product or service. Company ‘A’ charges VAT for their work, which is bought by Company ‘B’, and pays the VAT collected from ‘B’ to the Customs and Excise; Company ‘B’ can reclaim the VAT element in Company ‘A’’s invoice from the Customs and Excise, but will charge VAT on their work in their invoice to Company ‘C’. Each company along the line charges VAT and pays it to the Customs and Excise, but claims back any VAT charged to them. The final consumer pays a price which includes VAT, and which is the final VAT revenue paid to the Customs and Excise. Any company or individual should register for VAT if their annual turnover or income is above a certain level.