Introduction to VAT

Value Added Tax (VAT) is a tax that's charged on most goods and services that VAT-registered businesses provide in St Vincent and the Grenadines. VAT is charged when a VAT-registered business sells to either another business or to a non-business customer.
When a VAT-registered business buys goods or services they can generally reclaim the VAT they have paid.
There are three rates of VAT, depending on the goods or services the business provides. The rates are:

standard - 15 per cent

reduced - 10 per cent

zero - 0 per cent

There are also some goods and services that are exempt from VAT
This guide explains the basics of how VAT works. It tells you where you can find more information and advice.

What is VAT?

VAT is a tax that is charged on most business transactions in St. Vincent and the Grenadines. It functions similarly to a retail sales tax. Businesses add VAT to the price they charge when they provide goods and services to:

	business customers - for example, a clothing manufacturer adds VAT to the prices they charge a clothes shop
	non-business customers (members of the public or 'consumers') - for example, a hairdressing salon includes VAT in the prices they charge members of the public
If you are a VAT-registered business, in most cases you:
	charge VAT on the goods and services you provide
	reclaim the VAT you pay when you buy goods and services for your business

If you are not a VAT-registered business or organisation, then you can't reclaim the VAT you pay when you purchase goods and services.

Who charges VAT and what VAT is charged on

VAT-registered businesses add VAT to the sale price of most goods and services they provide.

When you must register for VAT

You'll have to register for VAT if you're a business and the goods or services you provide count as what's known as 'taxable supplied', and if either:

	your turnover for the previous 12 months has gone over a specific limit - called the 'VAT threshold' (currently $120,000)
	you think your turnover will soon go over this limit

You can choose to register for VAT if you want, even if you don't have to.

What is VAT charged on?

If you're VAT-registered, you'll have to charge VAT on any goods and services that you provide in the UK that are VAT taxable. You charge VAT on the full sale price, even if you accept goods in part exchange or through barter instead of money.

Products and services where you have to charge VAT.

How VAT is charged and accounted for

If you're VAT-registered, the VAT you add to the sale price of your goods or services is called your 'output tax'. The VAT you pay when you buy goods and services for your business is called your 'input tax'.

Filling in your VAT Return

If you're VAT-registered, you'll have to fill in a VAT Return at regular intervals - usually quarterly - and send it to the Inland Revenue Department. The return shows:
 

	the VAT you have charged on your sales to your customers in the period - known as output tax
	the VAT you have paid on your purchases - known as input tax

If the amount of output tax is more than the input tax, then you send the difference to Inland REvenue with your return.
If the input tax is more than your output tax, you claim a VAT repayment on your return.
There are special schemes that some businesses can use to help them work out and pay their VAT.
How to complete and file a VAT return.
VAT accounting schemes: the basics.

Rates of VAT

There are different VAT rates, depending on the goods or services that are being provided. At the moment there are three rates:
standard rate - 15 per cent
reduced rate - 10 per cent
zero rate - 0 per cent
The standard rate of VAT is the default rate - this is the rate that is charged on most goods and services in the UK unless they are specifically identified as being reduced or zero-rated.

Examples of reduced-rate items

Currently, the reduced rate of 10% applies to hotel room rates.

Examples of zero-rated items

These are examples of goods and services that may be zero-rated, depending on the product itself and the circumstances of the sale:

	food - but not meals in restaurants or hot takeaways
	books and newspapers
	children's clothing and shoes
	public transport

This is not a full list of zero-rated items.

Items not covered by VAT

There are some items that aren't covered by VAT. These items are either:

	exempt
	outside the scope of VAT

Exempt items

Some items are exempt from VAT because the law says they mustn't have any VAT charged on them. Items that are exempt from VAT include the following:
 

	certain basic foods
	gasoline, diesel and cooking gas
	computers
	education and training, if certain conditions are met
	most health services
	veterinary services

See the list of VAT exempt items here<@@@insert link to “consumer no VAT goods and services” document>.

Outside the scope of VAT

There are some things that aren't in the VAT system at all - they're outside the scope of VAT. They are not taxable supplies and no VAT is charged on them. Items that are outside the scope of VAT include:

	non-business activities like a hobby - for example, you might sell some stamps from your collection
	fees that are fixed by law - known as 'statutory fees' - for example the congestion charge or vehicle MOT tests

The difference between exempt and zero-rated

If you sell zero-rated goods or services, they count as taxable supplies, but you don't add any VAT to your selling price because the VAT rate is 0 per cent.
If you sell goods or services that are exempt, you don't charge any VAT and they are not taxable supplies. This means that you won't normally be able to reclaim any of the VAT on your expenses.
Generally, you can't register for VAT or reclaim the VAT on your purchases if you sell only exempt goods or services. If you sell some exempt goods or services you may not be able to reclaim the VAT on all of your purchases.
If you buy and sell only - or mainly - zero-rated goods or services you can apply to HM Revenue & Customs (HMRC) to be exempt from registering for VAT. This could make sense if you pay little or no VAT on your purchases
Find out more about VAT
<@@@ Insert Link to VAT regulations document and the Understanding VAT publication here> (along with any other pertinent documents)
 

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