VAT - The Basics

Introduction to VAT

VAT is a transaction tax. It is applied to business transactions where there is a supply of goods/services.

How VAT Works

There are 3 rates of VAT:

  • 20% Standard rate
  •  5%  Reduced rate
  •  0%  Zero rate

In addition, some supplies are exempt from VAT and others fall outside the scope of VAT. In both these VAT is not charged on the transaction. The supply of education is an example of an exempt supply. 

The University

The University is a charity registered by Royal Charter and is also a corporate body. The University is registered for VAT and therefore charges VAT on all taxable supplies it makes and is required to submit quarterly VAT returns to HMRC as its taxable supplies exceed a specific limit.

The University VAT registration number is 916 583 894

The basic mechanics of VAT:

If the VAT we collect on our sales (output VAT) exceeds the VAT on our purchases (input VAT) the University pays the difference to HMRC. If the input VAT exceeds output VAT then we can claim back the difference from HMRC.

The University is an eligible body, therefore our supplies of education are exempt from VAT. However we do make some other supplies where we do charge VAT. We make both taxable and exempt supplies and incur input tax that relates to both kinds of supply, therefore the University is classified as 'partly exempt'. We calculate the percentage of input tax we are able to recover on an annual basis.

The VAT codes that we use show the VAT liability of the transaction and feed into the quarterly VAT return. Therefore it is important for staff to use the correct VAT codes. For further information about what VAT code to use go to sections about coding income and expenditure.

Links :

VAT : The Basics   -  Powerpoint training presentation 

VAT : Quick guide to rates   - Single slide powerpoint presentation


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