UK VAT glossary

33 terms

Accounting period

The period covered by a VAT Return. Many businesses use quarterly periods, but monthly, annual and non-standard periods also exist.

Bad-debt relief

A mechanism that may allow output VAT to be recovered when a customer has not paid, subject to timing, write-off and record conditions.

Business activity

An economic activity carried out for remuneration. Receiving money does not by itself prove there is a business supply.

Capital Goods Scheme

A system that adjusts input VAT recovery on specified high-value land, building, computer and aircraft or vessel capital items when use changes over time.

C79 certificate

A monthly certificate that can provide evidence of import VAT paid, where import VAT was paid rather than postponed.

Consideration

The payment or other value given in return for a supply. The connection between payment and supply is central to VAT.

Deemed supplier

A person, often an online marketplace in specified transactions, treated as making the supply for VAT even where another seller provides the goods.

De minimis

A partial-exemption test that can allow exempt input tax to be recovered where the relevant limits and conditions are met.

Digital link

An electronic transfer of VAT data between software products without manual re-keying or copy and paste.

Direct attribution

The process of identifying input tax that relates directly to taxable, exempt or non-business activity before apportioning shared costs.

Disbursement

A payment made to a third party as agent for a client that may sit outside the value of the adviser’s own supply only when the detailed conditions are met.

Domestic reverse charge

A mechanism that makes the customer account for output VAT on specified domestic supplies, including qualifying construction services.

End user

For the construction reverse charge, a business that receives building or construction services for itself rather than making an onward supply of those services.

Exempt supply

A supply on which no output VAT is charged and which can restrict recovery of related input VAT. Exempt is not the same as zero-rated.

Input tax

VAT incurred on purchases and expenses that may be deductible subject to business use, attribution, evidence and specific restrictions.

Making Tax Digital

The rules requiring affected VAT-registered businesses to keep specified digital records and submit returns using compatible software.

Non-established taxable person

A taxable person with no UK establishment. The domestic VAT registration threshold generally does not apply to its taxable UK supplies.

Option to tax

An election that normally makes specified supplies of opted land and buildings standard-rated, subject to exclusions, disapplication and anti-avoidance rules.

Outside the scope

A transaction not subject to UK VAT. This can arise because there is no business supply or because the place of supply is outside the UK.

Output tax

VAT due on taxable supplies made by a VAT-registered business and other transactions for which it must account.

Partial exemption

The rules restricting input tax where a business makes both taxable and exempt supplies.

Place of supply

The rules identifying the country in which a supply is treated as taking place for VAT purposes.

Postponed VAT accounting

A method that allows eligible import VAT to be declared and, subject to normal recovery rules, reclaimed on the same VAT Return.

Reduced rate

A positive VAT rate lower than the standard rate. In the UK the general reduced rate is currently 5%, but it only applies to specified supplies.

Reverse charge

A mechanism under which the customer accounts for VAT that would otherwise be accounted for by the supplier.

Special method

A partial-exemption calculation method approved for a business where it provides a fairer result than the standard method.

Standard method

The default partial-exemption method, generally based on the value of taxable supplies as a proportion of total supplies, subject to detailed rules.

Tax point

The time at which a supply is treated as taking place for VAT. It determines the return period and can be affected by invoices, payments and specific rules.

Taxable person

A person registered or required to be registered for VAT.

Taxable turnover

The value of taxable supplies, including standard, reduced and zero-rated supplies, used for VAT registration testing.

Transfer of a going concern

A transfer of a live business or operating part that is treated as neither a supply of goods nor services when the mandatory conditions are met.

VAT group

Two or more eligible bodies treated as one taxable person under a single VAT registration, with a representative member and shared liability implications.

Zero-rated supply

A taxable supply charged at 0%. It counts as taxable turnover and can support input VAT recovery, unlike many exempt supplies.