Value Added Tax

An indirect tax levied on goods and services at each stage of production in many countries. A company or trader registered for VAT pays its suppliers VAT additionally to the cost of goods or services purchased Ð this is known as an input tax. Also VAT is added to the sales cost of their product when invoicing customers Ð known as output tax. The difference between output tax and input tax is payable to the appropriate government department Ð HM Revenue & Customs (HMRC) in the UK.