VAT is a tax on the value added to goods and services at each stage of production or distribution. It is a consumption tax, which means that it is paid by the end consumer of the goods or services.

As of 2022, the standard rate of VAT in the UK is 20%. However, certain goods and services are subject to a reduced rate of 5%, such as domestic fuel and power, and some children's car seats. There is also a zero rate of VAT for certain goods and services, such as most food items, books, and children's clothing.

Businesses that are registered for VAT are required to charge VAT on their sales and pay this to HM Revenue and Customs (HMRC), the UK's tax authority. However, businesses can reclaim any VAT that they have paid on their business purchases and expenses.

Businesses with a turnover of over a certain amount (currently £85,000 per year) are required to register for VAT and submit regular VAT returns to HMRC. VAT returns provide details of the VAT that has been charged on sales and the VAT that has been paid on purchases during a specific period, usually a quarter. Businesses can either pay the VAT due or claim a refund of any VAT overpaid.

In addition to the standard, reduced, and zero rates of VAT, there are also some goods and services that are exempt from VAT, such as some types of education and healthcare services. However, businesses that provide exempt goods and services are generally not able to reclaim any VAT that they have paid on their business purchases and expenses related to those exempt goods and services.

The VAT system in the UK is complex, and there are various rules and exemptions that apply to different types of goods and services. Businesses that are unsure of their VAT obligations or require further guidance should seek professional advice.