Output tax is the VAT a VAT-registered business charges on the goods and services it sells. It is reported in box 1 of the VAT Return and paid to HMRC, less the input tax the business can reclaim.
How it works
When you make a taxable sale you add VAT at the right rate, normally 20%, and show it on your invoice. That VAT is your output tax. You are collecting it for HMRC: on each VAT Return you total it in box 1, deduct your input tax in box 4, and pay over the difference.
When it is due
Under standard VAT accounting, output tax is due for the period in which you issue the invoice, whether or not the customer has paid. Under the Cash Accounting Scheme it is due when you are paid.
Output tax without a sale
- Goods taken out of the business for private use.
- Services bought from overseas suppliers, and some UK supplies such as construction services, where the customer accounts for the VAT under the reverse charge.
No output tax is charged on exempt supplies, and zero-rated supplies carry it at 0%.
Read more: VAT.