What is VAT?

VAT stands for Value Added Tax that is imposed on the exchange of services or goods during the UK based business. This tax is applied by the companies and large organization on the HM Revenues and the customs. It is calculated by following formula:

VAT = (The amount of VAT charged) - (Any VAT paid for the personal purchase)

All the purchases are done by the VAT- rated rules or VAT-exempt. I think you are familiar with VAT-rated but got confused with term VAT-exempt. VAT-exempt is basically a tax that is applied to the private studies, rents, health facilities, postal, insurance, gambling, and finance services.

When you have started the business in the UK, you must register for the VAT when your sales cross the limit of £67000 per year. You can also make your business registered before hitting this target. In short, it is applied to every sale of goods. The standard rate of the VAT is 20% on every item.

You will get 5% off on the items such as moving aids, smoking ending items (like gums), gas, car seats, electricity, children seats, booster, and so on. There is 0 VAT rate on the limited items too. Such as cycle helmets, protectors, industrial security stuff, footwear, children clothing, leaflets, maintaining cost, services for special handicap or disable people.