What Is VAT Input And VAT Output?

22 March 2017


Corporate Tax Planning

What is the meaning of output tax?

Output VAT is the value added tax you charge on your own sales of goods and services both to other businesses and to ordinary consumers. When your business is registered for VAT, you need to add VAT to each VAT-able item on each of your sales invoices.

VAT on sales between businesses must be specified in a sales document which is a business document that relate to sales of goods and services. They consist of invoices, notes, bills and receipts issued by the seller, as well as contract notes and settlement notes.


What is the definition of input tax?

Input VAT is the value added tax added to the price when you purchase goods or services that are liable to VAT. If the person or businesses that is buying is registered for VAT they can deduct the amount of VAT paid from his/her settlement with the tax authorities.


Example of how to calculate output and input VAT

During a VAT period, Shop A (which is registered in the VAT Register) purchases goods for £62,000 including VAT (20% Rate)

  • The input VAT is £12,400

During the same period, the business sells goods for £150,000 excl. VAT as they are not registered.

  • The output VAT is £30,000.

In the VAT settlement, you deduct output VAT from input VAT which comes to £17,600

The resulting amount must be reported to your regional tax office.

If your purchases exceed your sales in any one period, the difference will be negative, and the difference will naturally be refunded.  


How we can help

Here at Haines Watts we can assist you in a number of ways:

  • Tailoring your accounting systems to accurately and quickly bring together VAT information.
  • Ensuring that your business is VAT efficient
  • Providing assistance with the completion of VAT returns
  • Negotiating with HMRC if disagreements arise and in reaching settlement
  • Advising as to whether any of the available schemes may be appropriate for you such as VAT flat rate scheme.

Next steps if you are....

....in the UK and need assistance

 Find out more about our VAT services here - ensuring that you comply with all the VAT regulations is essential to avoiding fines/penalties! 

....visiting from abroad and need assistance

Our international tax expertise, combined with commercial solutions, helps us to support businesses in South Africa, United Arab Emirates, Philippines, India, United States to name a few.If you would like to discuss any VAT requirements please contact one of our UK accountants today then please see our services page for international businesses to find out more.    


Further Reading

VAT Output Tax Toolkit -  A HMRC toolkit which aims to help and support tax agents and advisers in completing VAT Returns, although it may also be of use to anyone who thinking about their VAT Returns.


Nolan Gooch

Tax Partner