Value Added Tax (VAT) in UK

By: EconomyWatch   Date: 30 June 2010

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Value added tax in UK has been imposed on the final consumption of particular goods as well as services in the national market. At the same time, VAT in the UK is levied at various production phases. This tax is also imposed on the distribution phases of the products. According to this rule, almost all the goods and services in the United Kingdom are charged with Value Added Tax. Recently, the VAT rules have been revised in the United Kingdom. The government has decided to collect VAT at a standard rate of 17.5%. The VAT registration threshold has also been raised from £64,000 to £67,000.

These new rules and regulations have been implemented from April 2008.

Further, these rules have made it mandatory for the companies to register for value added tax if the company's taxable supplies have crossed the maximum limit of VAT threshold.

Again, if any company has found that its taxable supplies is under the UK VAT threshold, but is expected to cross the same within a month, the company has to register itself for the value added tax.

There are instances where the businessmen have registered themselves for VAT although the business turnover has been well under the threshold. This is done because registering for VAT provides a number of additional benefits.


The businesses have to pay this tax for every kind of purchase as well as sell of products or services. Taxes that are paid for purchasing products or services are known as input tax and the taxes paid for selling products and services are termed as output tax.

There are certain situations when a VAT registered business' output is higher than the input tax.

In these conditions the difference between the two is paid to the customs and excise. In certain situations the businesses receive less VAT than it pays. This extra amount is paid back to the businesses by the C&E.


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