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VAT Explained

Value Added Tax (VAT) is a form of taxation that probably goes unnoticed by many of us. It's a form of taxation that is applied to many business transactions, as well as to the sale of some goods and services.

The standard rate of VAT in the UK is 17.5%, which is applied to the vast majority of transactions. The other two recognised rates are the reduced rate of 5% and the zero rate of 0% (as the name suggests!)

If you run a business then you'll need to register for VAT if your turnover is greater than the current limit. Failure to apply can lead to you being fine. At the present time of writing (September 2004) the limit is set at 55,000.

You don't actually need to wait until you reach this limit before applying - you can voluntarily apply at a lower rate of turnover. There can be advantages to this approach but you should be sure of your responsibilities - becoming VAT registered will involve you needing to keep very good records and to supply VAT returns in a timely manner.