Value added tax -a tax charged on supplies of goods and services made by a taxable person in the course or furtherance of a business

Taxable person – any person (ie sole prop, partnership, limited company etc) who is registered or liable to be registered for VAT because they make taxable supplies over the VAT registration limit

Supplies – anything done or given in return for a consideration, ie sales of goods and services or barter transactions

Outputs – supplies made ie sales of goods or services

Output tax – VAT on taxable supplies made by a business

Inputs – supplies received ie purchases and expenses

Input tax – VAT on taxable supplies received by a business

Taxable supplies – supplies that are liable to VAT at any rate, ie 17.5%; 5% or 0%

Exempt supplies – supplies that are not taxable and are listed in the legislation as exempt from VAT

Exempt input tax – input tax on the cost of goods and services used to make exempt supplies

Partial exemption – when a business incurs VAT on inputs that are used to make both taxable and exempt supplies

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