VAT (Value Added Tax)

Definition

VAT, or Value Added Tax, is a consumption tax charged on most goods and services in the UK, EU, and many other countries.

Unlike US sales tax, which is charged only at the final sale, VAT is levied at each stage of production, with businesses reclaiming the VAT they pay on inputs. On a receipt, VAT appears as a net price, a VAT line at the applicable rate, and a gross total. The UK standard rate is 20%, with reduced and zero rates for certain goods. To remove VAT from a gross figure, divide by one plus the rate as a decimal.