What is output VAT?
Definition of output VAT
When is output VAT due?
Any output VAT charged by businesses is paid to HMRC at the end of a VAT period, minus any input VAT or other deductions that can be reclaimed.
A business makes £80,000 in VATable sales over a quarter. The goods are charged at the standard rate of 20% so the business collects £16,000 in VAT (£80,000 x 20%).
During the same period the business pays £50,000 for goods that are also charged at the standard rate of 20%. This means the business has paid £10,000 in input VAT (£50,000 x 20%) over the quarter.
To calculate its VAT liability for the quarter, the business would deduct the amount of input VAT it paid (£10,000) from the amount of output VAT it owed (£16,000) that quarter on its VAT return. In this example, the business’s VAT liability would be £6,000.
If a business pays more in input VAT over a period than it charges in output VAT, it will have a negative VAT liability. If this happens, the difference (the negative amount) can usually be reclaimed from HMRC in the form of a VAT refund.
Find out more about charging and reclaiming VAT in our comprehensive guide.