VAT Definition

GLOSSARY

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What does VAT mean?

Value Added Tax (VAT) is a tax charged on most goods and services when a VAT-registered business sells to either another business or to a non-business customer.

A transaction must have five elements for UK VAT to be chargeable. It must: be a supply of goods or a supply of services; be a taxable supply; take place in the UK; be made by a taxable person; and be made in the course or furtherance of any business carried on by that person.

Commercial

Value Added Tax (VAT) is a tax charged on most goods and services when a VAT-registered business sells to either another business or to a non-business customer.

View the related checklists about VAT

Cash searches—checklist

Cash searches—checklist Code of Practice The search powers covered in this Checklist are subject to the Recovery of cash: search powers, code of practice under section 292. Cash search powers A police, immigration, customs, Serious Fraud Office (SFO) officer or an accredited financial investigator (the relevant officer) may only exercise the power to search where the following criteria are met: Premises • the relevant officer must already have lawful authority to be present on the premises either under another statutory power or by invitation • the relevant officer must have reasonable grounds to suspect that cash is on the premises that is either recoverable property or is intended for use in unlawful conduct, see Practice Note: Cash searches under the Proceeds of Crime Act 2002 • the relevant officer must have reasonable grounds to suspect that the amount of cash is greater than the statutory minimum amount of £1,000 Vehicles • it must appear to the relevant officer that the vehicle is under the control of a person (ie the...

Issues to consider when drafting a settlement agreement—checklist (employer)

Issues to consider when drafting a settlement agreement—checklist (employer) The employer (and its advisers) should consider the following issues: Preparatory steps • Obtain from the employer: ◦ a copy of the departing employee's latest contract of employment/other relevant documents containing contractual terms (NB these may be in a staff handbook) ◦ details of the contractual benefits enjoyed by the employee ◦ relevant information regarding the employee's pension benefits ◦ relevant information regarding any shares/share options, etc held by the employee? Consider the Articles of Association/any relevant shareholder agreement, share scheme documentation, etc. See also Shares and share options below Status of negotiations • Will negotiations take place between the parties directly, or between their respective legal advisers? • How strong is the employer's negotiating position? How strong are the employee's claims or potential claims? In the case of dismissal, is there a fair reason and has the employer carried out a fair procedure? Is the employer in repudiatory breach? What is the employer prepared to offer initially, and is that...

What is VAT?

It is common knowledge that value added tax (VAT) is a tax which increases the price of goods and services that consumers in the UK buy. For a tax lawyer, before going into the detail of when it applies and how it is administered, it is important to understand more about what it is doing.Where does VAT come from?There are many different types of value added or sales taxes around the world. The UK VAT system is derived from the European Union (EU).The EU common system for VAT is set out in Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (the VAT Directive). It is a common system because it requires member states of the EU to bring in laws which implement the system. However there are a number of areas within the VAT system where member states have choices as to whether and how to implement the system. The most significant of those choices is on the rate of VAT.The common system...

When does VAT apply?

A transaction must have five elements for UK VAT to be chargeable. It must:•be a supply of goods or a supply of services•be a taxable supply•take place in the UK•be made by a taxable person, and•be made in the course or furtherance of any business carried on by that personThis Practice Note explains what each of those five elements means.This Practice Note does not cover importation of goods or the circumstances where a UK person may be required to pay UK VAT on the supply of services from abroad, ie the reverse charge, for which see Practice Notes: VAT—the reverse charge on cross-border supplies and VAT—importing goods.This Practice Note includes references to EU Directives and case law; for information on the ongoing significance of EU Directives, and of judgments of the Court of Justice for the UK’s VAT rules, see Practice Note: Retained EU law and tax.A supply of goods or a supply of servicesThe first element has three parts. A transaction must:•be a ‘supply’•be categorised as either a ‘supply...

Discover our 1195 Practice Notes on VAT

Tax wording for licence

Withholding taxes Licensor-friendly—gross-up clause 1 Any sum payable under this [agreement] shall be paid free and clear of any deduction or withholding in respect of any tax whatsoever, save only as may be required by law. If any deduction or withholding is required, the licensee shall promptly provide the licensor with such certificates or other documents as it can [reasonably] obtain to enable the licensor to obtain appropriate relief from double taxation of the payment in question. 2 Subject to clau

Settlement agreement additional clauses — outplacement

[Insert as additional definition:] Outplacement Counselling services that meet conditions A to D inclusive in section 310 Income Tax (Earnings and Pensions) Act 2003[ and travel expenses incurred in connection with the provision of those services, that meet condition E in that section]; [I

Dive into our 685 Precedents related to VAT

Is it possible for a pension scheme to pay costs net of VAT, with the company paying the VAT and recovering it from HMRC?

Is it possible for a pension scheme to pay costs net of VAT, with the company paying the VAT and recovering it from HMRC? As a general rule a value added tax (VAT) registered business: • must charge VAT on supplies of its goods and services (output VAT), if those supplies are standard-rated for VAT purposes, and • may recover VAT it has paid on business related goods or services (input VAT) subject to meeting certain conditions VAT invoices must be made out to the person who is the recipient of the supply. Subject to this it is permissible for a supplier to issue a VAT-only invoice and for the invoice to show that it is ‘payable by’ a third party. It is also possible for the recipient of a supply to pay the whole (VAT-inclusive) amount and recharge the VAT element to a third party. In both cases, it will be necessary to consider the implications for recovery of the input tax concerned. The conditions that...

Is an option to tax effective before it has been accepted by HMRC?

Is an option to tax effective before it has been accepted by HMRC? An option to tax takes effect from the date on which it is exercised, or any later date specified in the option (paragraph 19(1) of Schedule 10, Part 1 of the Value Added Tax Act 1994 (VATA 1994)). The exercise of the option is simply making the decision to opt. There is no formal process for this, although it may be advisable to have a written record. The option must be notified to HMRC within 30 days, but notification is a separate step (see HMRC’s VAT Land and Property Manual, VATLP22360). It is the exercise of the option, and not its notification, that determines the date on which the option takes effect. HMRC is not under a legal obligation to acknowledge that it has received a notification, although in practice it does

See the 201 Q&As about VAT

Weekly roundup of HMRC import, export and customs guidance—16 December 2024

Details of updates to HMRC import, export and customs guidance for the period from 10 to 16 December 2024.

Tax weekly highlights—12 December 2024

This week's edition of Tax weekly highlights includes: (1) key announcements from the draft Welsh Budget 2025–26, (2) analysis of the Court of Appeal’s decision in Axa Sun Life plc v HMRC, and (3) the UT’s decision in HMRC v Colchester Institute Corporation.

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GLOSSARY

VAT definition

What does VAT mean?

Commercial

View the related checklists about VAT

Cash searches—checklist

Issues to consider when drafting a settlement agreement—checklist (employer)

View the related practice notes about VAT

What is VAT?

When does VAT apply?

View the related precedents about VAT

Tax wording for licence

Settlement agreement additional clauses — outplacement

View the related q&as about VAT

Is it possible for a pension scheme to pay costs net of VAT, with the company paying the VAT and recovering it from HMRC?

Is an option to tax effective before it has been accepted by HMRC?

View the related News about VAT

Weekly roundup of HMRC import, export and customs guidance—16 December 2024

Tax weekly highlights—12 December 2024

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Related Content

GLOSSARY

VAT definition

What does VAT mean?

Commercial

View the related checklists about VAT

Cash searches—checklist

Issues to consider when drafting a settlement agreement—checklist (employer)

View the related practice notes about VAT

What is VAT?

When does VAT apply?

View the related precedents about VAT

Tax wording for licence

Settlement agreement additional clauses — outplacement

View the related q&as about VAT

Is it possible for a pension scheme to pay costs net of VAT, with the company paying the VAT and recovering it from HMRC?

Is an option to tax effective before it has been accepted by HMRC?

View the related News about VAT

Weekly roundup of HMRC import, export and customs guidance—16 December 2024

Tax weekly highlights—12 December 2024

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HELP & SUPPORT

LEGAL SOLUTIONS

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