Input Tax

When a company that is registered for value added tax (VAT) buys goods or services from another supplier, VAT is charged and is currently 17.5% of the purchase cost. This is known as input tax. Similarly, when the company sells its own goods or services it charges its customers VAT at the same rate. This is output tax. Once a quarter, the company has to complete a VAT return, giving details of its input tax and output tax. The difference between output tax and input tax is payable to HM Revenue & Customs. If input tax is greater than output tax the company can claim back money from HMRC.