{m}.{s}.1VAT is charged by many businesses on the goods and services they provide.

Output VAT is charged by a business on its sales. This is credited to the VAT account.

Input VAT is suffered by a business on goods and services it buys. This is debited to the VAT account.

If output VAT exceeds input VAT, the balance is due to be paid to HM Revenue & Customs.

If input VAT exceeds output VAT, the balance is due to be recovered from HM Revenue & Customs.

 

VAT
    
VAT on expensesVAT on sales
(INPUT VAT)(OUTPUT VAT)
    
[{m}.{s}a]

{m}.{s}.2For a VAT rate of 15%:

  • Net = 100%
  • VAT = 15%
  • Gross = 115%

{m}.{s}.3In practice, it may be best to keep three VAT accounts:

  • Input VAT
  • Output VAT
  • VAT Liability