Value Added Tax

Stacks of coins with the letters VAT isolated on white background

The Background

Value Added Tax (VAT) is a form of consumption tax.

From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the value added to a product, material, or service, from an accounting point of view, by this stage of its manufacture or distribution.

The manufacturer remits to the government the difference between these two amounts, and retains the rest for themselves to offset the taxes they had previously paid on the inputs.

The purpose of VAT is to generate tax revenues to the government similar to the corporate income tax or the personal income tax.

The value added to a product by or with a business is the sale price charged to its customer, minus the cost of materials and other taxable inputs.

VAT is like a sales tax in that ultimately only the end consumer is taxed. It differs from sales tax in that, with the latter, the tax is collected and remitted to the government only once, at the point of purchase by the end consumer. With VAT, collections, remittances to the government, and credits for taxes already paid occur each time a business in the supply chain purchases products.

IAIS have VAT specialists in all areas of VAT, whether it be goods services or land and property to assist you and your business.

 

IAIS is a network of professional firms and individuals providing Tax and Advisory services. We deliver all mainstream Accountancy and Taxation Services as well as Value Added services to clients throughout the United Kingdom and Internationally.