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The taxable turnover threshold that determines whether businesses should be registered for VAT is currently £85,000. Businesses with turnover below this level can also apply for a voluntary VAT registration.
Businesses charge VAT on their sales. This is known as output VAT and the sales are referred to as outputs. Similarly, VAT will be payable on most goods and services purchased by the business. This is known as input VAT.
The output VAT is collected from the customer by the business on behalf of HMRC and must be regularly paid over to HMRC. However, the input VAT suffered on most (but not all) goods and services purchased for the business can be deducted from the amount of output tax owed to HMRC.
If your input tax is greater than your output tax, HMRC will owe you a refund.
As a VAT-registered business you must: