Value Added Tax (VAT) is a transaction based tax, the effect of which is to tax consumer expenditure - see example of how the VAT system works.
UK VAT can be charged on goods and services supplied within the UK, on goods and services provided from another EU country, and on goods and services received from the rest of the world (RoW). It should be noted that UK VAT can often be chargeable on non-UK purchases even in the absence of any VAT appearing on an invoice.
VAT is a significant cost to the University, however the reclaim of VAT from HMRC can be maximised through accurate coding of transactions. It is the aim of the University's Tax Section, within this area of the Finance website, to provide background information to assist with an understanding of VAT, and to ensure that the coding of transactions is correct. Refer to 'VAT coding' for assistance.
UK VAT is charged at either:
- 20% Standard rate
- 5% Reduced rate
- 0% Zero rate
A transaction on which VAT is charged at any of the above three rates, is termed a taxable supply. Apart from being a taxable supply, a transaction can either be exempt from VAT, or outside the scope of VAT. Refer to 'VAT rates' for guidance to determine whether VAT is charged, and if so at what rate.