VAT Information

VAT information

Value added tax (VAT) is a tax levied on sales by the UK government. It is described as an "inderect tax" and ultimately the tax is paid by the final consumer of the goods and services.
VAT is administrered in the UK by HM Customs and Excise
There are currently three rates of VAT , namely 0 per cent, 5 per cent and 20 per cent
The way in which the VAT system operates is explained whereby VAT is paid at various stages in the distribution chain
Businesses may be classified as standard-rated, zero-rated, exempt or partially exmpt
The book-keeping entries for the recording of VAT in the books of account in shown for the various types of business
When preparing sales invoices the trade discount is deducted before VAT is added on
If a business allows cash discount for prompt payment the VAT is calculated on the sales value less any cash discount offered. If the cash discount is lost because of late payment the VAT will not change.
VAT may also be charged on items of expense and the purchase of fixed assets.The book-keeping entries vary depending upon whether the firm is able to reclaim the VAT paid or not
At the end of a particular quarter a VAT return form is completed and sebt to HM Customs and Excise together with any payment due.Alternatively,there may be a refund due