VAT Glossary
Find definitions of the main terms related to VAT in the UK.
VAT Base
The total value on which VAT is charged. For example, if goods are sold for £100, the VAT base is £100 before applying the VAT rate.
Reverse Charge
A system where the customer, not the supplier, accounts for the VAT. Common in cross-border services and certain UK domestic construction services.
VAT Credit
Occurs when input VAT (on purchases) is higher than output VAT (on sales). Businesses can request a refund from HMRC or carry it forward.
VAT Exemption Threshold
The turnover level under which a business does not need to register for VAT. In the UK, the threshold is £85,000 (2024).
VAT Pro-Rata
Used by businesses making both taxable and exempt supplies to calculate how much input VAT can be reclaimed.
Input VAT
VAT paid on purchases and expenses that can often be reclaimed from HMRC if related to taxable business activities.
Output VAT
VAT charged on sales to customers. This must be reported and paid to HMRC, minus any deductible input VAT.
Tax Point (Time of Supply)
The date when a sale is treated as taking place for VAT purposes. Usually the invoice date or payment date.
For more information on VAT, consult the official tax website or contact a tax advisor.