VAT Glossary

A–E

Acquisition

Obtaining goods from another EU member state (Northern Ireland only, post-Brexit). Reported in Box 2 and Box 9 of the VAT Return.

Annual Accounting Scheme

A scheme allowing you to file one VAT Return per year instead of four, with regular advance payments.

Bridging Software

Software that takes VAT figures from a spreadsheet and submits them to HMRC via the MTD API.

Cash Accounting Scheme

A scheme where you account for VAT when you receive or make payment, rather than when you invoice.

De Minimis

The threshold below which exempt input VAT is small enough to be fully reclaimed under partial exemption rules (£625/month on average and no more than 50% of total input VAT).

Deemed Supply

A transaction treated as a supply for VAT purposes even though no sale has occurred (e.g. taking business goods for personal use).

Digital Link

An electronic transfer of data between software without manual re-keying. Required under MTD.

Dispatch

Sending goods to another EU member state (Northern Ireland only). Reported in Box 8.

Exempt Supply

A supply of goods or services that is not subject to VAT. You cannot reclaim input VAT on purchases used to make exempt supplies.

F–M

Flat Rate Scheme (FRS)

A simplified VAT scheme where you pay a fixed percentage of your gross turnover instead of tracking actual input/output VAT.

Input VAT

VAT you pay on business purchases. Usually reclaimable on your VAT Return.

Limited Cost Business

A business on the Flat Rate Scheme that spends less than 2% of gross turnover on goods. Must use the 16.5% flat rate.

Margin Scheme

A scheme for dealing in second-hand goods where VAT is only charged on the profit margin.

Making Tax Digital (MTD)

HMRC’s programme requiring digital record-keeping and filing via compatible software.

MTIC Fraud

Missing Trader Intra-Community fraud (carousel fraud). A type of VAT fraud exploiting cross-border transactions.

N–P

Option to Tax

A choice to charge VAT on the sale or rental of commercial land/buildings (which are otherwise exempt).

Output VAT

VAT you charge on your sales. Collected on behalf of HMRC.

Partial Exemption

When a business makes both taxable and exempt supplies and must apportion its input VAT accordingly.

Penalty Point

A point issued by HMRC for each late VAT Return submission. Accumulating enough points triggers a £200 penalty.

Place of Supply

The rules determining which country’s VAT applies to a transaction.

Postponed VAT Accounting (PVA)

Accounting for import VAT on your VAT Return rather than paying at the border.

R–Z

Reverse Charge

A mechanism where the customer (not the supplier) accounts for VAT. Used in construction, telecoms, and cross-border services.

Stagger Group

The schedule determining your VAT Return quarter-end months (Group 1, 2, or 3).

Standard Rate

The default UK VAT rate of 20%.

Tax Point

The date a supply is treated as taking place for VAT purposes. Usually the date of supply, invoice, or payment (whichever is earliest).

Taxable Turnover

The total value of all taxable supplies (standard, reduced, and zero-rated). Used to determine VAT registration obligations.

TOGC (Transfer of a Going Concern)

The sale of a business as a going concern. Outside the scope of VAT (no VAT is charged).

VAT Return

The form (9 boxes) submitted to HMRC showing output VAT, input VAT, and net VAT due or reclaimable.

VIES

VAT Information Exchange System. The EU system for verifying VAT numbers.

Zero-Rated

Taxable at 0% VAT. You can reclaim input VAT on related purchases despite charging nothing to the customer.