Companies with a turnover of £70,000 must register and charge VAT on sales made in the United Kingdom. For a company with a turnover of less than £70,000 there is no requirement to register. Such a company can request a voluntary registration.

The standard rate of VAT is 17.5%. For certain transactions, however (for example non luxury food items), the rate is 0%.

A company must account for all the VAT that it has charged during a designated period (Output VAT). The VAT that has been incurred by the company on goods and services (Input VAT) may be deducted from that charged. The net VAT (Output VAT less Input VAT) is payable to H M Revenue & Customs on submission of the quarterly VAT return within one calendar month of the end of the VAT period.

VAT is also charged on goods imported into the United Kingdom together with Import Duty. The VAT can be reclaimed but note that the Import Duty cannot.

There are a number of different schemes for calculating the VAT that must be repaid to H M Revenue & Customs; for example, partial exemption, flat rate and cash accounting. Professional advice must be sought when deciding which scheme best suits the need of the company.