VAT

Question 1

What is the definition of a VAT ?

Answer 1

VAT (sales tax) is a consumption tax added to a product’s selling price. It represents a tax on the ‘value added’ to the product at each stage of a production or supply process.

Question 2

What is the definition of a input tax ?

Answer 2

Input tax is the tax paid on the purchase of goods and services.

Question 3

What is the definition of a output tax ?

Answer 3

Output tax is the tax charged on the sale of goods and services.

Question 4

What goods and services are exempt from VAT ?

Answer 4

• certain land and buildings, where sold, leased or hired
• insurance
• Post Office postal services
• admission charges to museums, art galleries etc.
• betting, gaming and lotteries.

Question 5

What examples are there of zero-rated VAT supplies ?

Answer 5

• water and most types of foodstuffs (i.e. not hot food and not food
  eaten in a restaurant/café, as service is also provided which is
  taxable)
• books and newspapers
• drugs and medicines
• children’s clothing and footwear.

Question 6

What items have non deductible VAT

Answer 6

• Motor cars
• Business entertaining