VAT stands for Value Added Tax, which is a consumption tax assessed on the value added to goods and services as they move through the supply chain. VAT is charged on most goods and services, and it is a general tax that applies to all commercial activities involving the production and distribution of goods and the provision of services. VAT is charged as a percentage of the price, which means that the actual tax burden is visible at each stage in the production and distribution chain. VAT is charged on the full value of what is sold, including incidental charges incurred by the supplier which are passed on to the customer.

Here are some examples of what VAT is charged on:

• Goods and services (a service is anything other than supplying goods)
• Hiring or loaning goods to someone
• Selling business assets
• Commission
• Items sold to staff, e.g. staff meals
• Business goods used for personal reasons
• Non-sales like bartering, part-exchange, and gifts

It is important to note that VAT is not charged on goods or services that are exempt from VAT or are unaffected by VAT (out of scope). Charities have different rules governing their VAT. As a VAT-registered company, you must charge VAT on your goods or services, and can also reclaim VAT on those you have purchased for business-related purposes. The rate of VAT depends on the nature of the good or service being purchased, and some services and goods are VAT-exempt.