General principles of VAT

Produced by Tolley

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • General principles of VAT
  • What is VAT?
  • What is a taxable supply of goods and services?
  • Who is a taxable person?
  • What does ‘made in the UK’ or ‘Isle of Man’ mean?
  • What is ‘in the course of furtherance of a business’?
  • What is consideration?
  • Acquiring goods in Northern Ireland
  • Imports
  • What services are subject to the ‘reverse charge’?
  • More...

General principles of VAT

This guidance note provides an overview of the general principles of VAT.

What is VAT?

VAT is an indirect tax which is collected on consumer spending. It is collected on:

  1. taxable supplies of goods and services

  2. imports of goods

  3. acquisitions of goods in Northern Ireland from EU member states

  4. supplies of goods and services liable to the reverse charge (domestic and cross border supplies)

VATA 1994, s 1; De Voil Indirect Tax Service V3.101, V3.301; Notice 700 (The VAT Guide), para 3.2

These principles are explained in more detail below.

What is a taxable supply of goods and services?

A taxable supply is:

  1. a supply of goods and / or services that is liable to VAT at the standard rate, reduced rate or zero-rate of VAT (see below)

  2. by a taxable person

  3. made in the UK or Isle of Man

  4. in the course or furtherance of a business

VATA 1994, para 4; Notice 700 (The VAT Guide), paras 4.4, 4.5

See the Supply and consideration ― goods or services? guidance note for more information on what constitutes a supply of goods or services.

The following supplies are outside the scope of UK VAT:

  1. supplies made by a person who is not a taxable person

  2. supplies where the place of supply is outside of the UK and the Isle of Man

  3. supplies that are not made in the course or furtherance of a business

These principles are discussed further below.

Who is a taxable person?

A taxable person is an individual, partnership, company or other organisation who is either registered for VAT or required to be registered for VAT. A person is required to be registered for VAT if the value of the taxable supplies made by the business have exceeded the VAT registration threshold. See the Overview ― registering for VAT guidance note for more information.

Businesses that are established in the UK that are making taxable supplies below the UK VAT registration threshold can voluntarily register for UK VAT

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