Output tax is the tax that a VAT registered business is required to charge on its taxable supplies (broadly, its sales) at the standard and reduced rates of VAT. It is payable to HMRC after the deduction of any recoverable input tax.
Output tax must also be accounted for on certain ‘deemed supplies’ made by the business, such as gifts, the use of business assets for non-business purposes, and where a relief from VAT no longer applies (for example where the purchase of a building was zero-rated on the grounds that it was to be used for charitable purposes, and it ceases to be used for such purposes).
In some cases the liability to account for output tax becomes the liability of the purchaser, rather than the seller. This is known as the reverse charge. In those cases, the output tax is simultaneously recoverable as input tax, subject to any restrictions which may apply.
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