Valued added tax is a national tax on goods and services that is assessed by countries in the European Union. Output VAT refers to the amount of VAT tax charged on a sale.
In the United Kingdom, the VAT rate is set at three levels: zero, 5 and 17.5 percent. Goods and services are classified and assigned one of the three rates. For example, if an item costs 100 pounds and is taxed at the 17.5 percent rate, the output tax is 17.50 pounds.
Businesses should report output VAT, or VAT charged and collected, every three months to the UK government’s Revenue and Customs agency.
Businesses may offset the amount of VAT to be paid to the government by deducting input VAT from output VAT. Input VAT is the VAT paid by the business on business supplies.
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