Small Business Tax Dictionary

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VAT (Value Added Tax)

Value Added Tax (VAT) is a consumption tax in the United Kingdom levied on the value added to goods and services at each stage of production or distribution. The standard VAT rate is 20%, with reduced rates for certain items. Businesses registered for VAT must charge the tax on taxable sales and can claim credits for VAT paid on business purchases. Compliance with VAT regulations is vital for UK businesses, affecting pricing, invoicing, and reporting practices. Proper understanding and management of VAT ensure financial accuracy and legal compliance, contributing to responsible business operations and growth.