How Does Value Added Tax Work
VAT is a very complex tax. But the basics are as follows:
Value Added Tax (VAT) is tax on everyday goods and services. Every person in the UK has to pay VAT. The rate of VAT you pay will depend on what goods or services you are purchasing.
The good news is that not every item you purchase has VAT. Essential items such as everyday groceries are taxed at zero rate, effectively you would not pay VAT on these items. On the other hand, non-essential items will usually attract a VAT rate of 20%. If you run a business that trades in taxable supplies with a turnover of more than £85,000 then you must register for VAT. This means that you must charge and collect VAT from your customers at the applicable rate.
However, you can sometimes reclaim the VAT that you have paid on your purchases. The VAT is then calculated and paid to HMRC usually on a quarterly basis, our mission is to make this process as painless for you as possible.