VAT for businesses
VAT is a tax that you pay as a consumer when you buy goods and services in the European Union (EU), including the United Kingdom.
Rates of VAT
Each country in the EU has its own rate for VAT. In the UK the standard rate, which applies to most goods and services, is 17.5 per cent.
Some items, like domestic power, are charged at a reduced rate of five per cent. (You pay no VAT at all on other items like books and newspapers.)
How is VAT worked out?
When someone charges you VAT they multiply the original, or 'net', price of the item by the VAT rate to calculate the amount of VAT to charge. They then add the VAT amount to the net price to give the 'gross' price - the price you pay.
VAT for businesses
Only VAT-registered businesses can charge you VAT.
Registering for VAT means that the business has to keep a record of all VAT it pays out or charges. If a business is registered for VAT, it has to fill in VAT returns showing how much VAT it has paid and how much VAT it has charged.
VAT on bills and receipts
Most retail prices include VAT - it is not shown separately. But you may see a line showing VAT on a bill or receipt. This does not mean that you are being charged extra; it just shows how much of the price is made up of tax.
You sometimes need a receipt that shows the VAT amount and the VAT registration number of the business, for example, if you are buying something for your employer or need to claim on expenses.
Do you have to pay the VAT charged?
You have to pay VAT unless you think that the business is not VAT-registered. If a bill shows a separate amount for VAT, it must also show the VAT registration number of the business. The National Advice Service can tell you if a VAT number is valid: telephone 0845 010 9000 - lines are open 8.00 am to 8.00 pm Monday to Friday.
Further information
If you have a query, you can contact the HM Revenue & Customs (HMRC) helpline on 0845 010 9000. Lines are open 8.00 am to 8.00 pm Monday to Friday.
Links
For more information on VAT (external link)
For more information on HM Revenues & Customs (external link)
Business Link guide to VAT for small businesses (external link)
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