AAT TPFB key terms

Any individual, company or other entity that is registered for VAT, or is required to be registered, because it makes taxable supplies in the course of its business.

The amount of VAT-taxable turnover in any rolling twelve-month period at which a business becomes liable to register for VAT; the figure is set by the government and reviewed at Budgets.

Registration that HMRC requires when a business's taxable turnover passes the registration threshold, or when it takes over a VAT-registered business as a going concern. The business must notify HMRC within set time limits.

Registration applied for by a business whose turnover is below the threshold, usually so it can reclaim input tax on purchases or appear more credible to customers. HMRC must approve the application.

A supply of goods or services charged VAT at the standard rate of 20 per cent, which is the default rate applied to anything not specifically reduced-rated, zero-rated or exempt.

A supply charged VAT at 5 per cent, for example domestic fuel and power, certain energy-saving materials, children's car seats and some residential renovations.

A taxable supply charged VAT at 0 per cent. No VAT is added to the price, but the business can still recover input tax on related costs; examples include most food and books.

A supply that falls outside the charge to VAT, such as most education, health services, insurance and financial services. No output tax is charged and related input tax normally cannot be recovered.

The VAT a registered business charges customers on its taxable supplies and pays over to HMRC, usually collected on sales invoices and recorded in the VAT account.

The VAT a registered business is charged on purchases and expenses. It can normally be reclaimed against output tax, provided the costs are used for taxable business purposes and evidence is held.

A document issued by a registered supplier showing the VAT charged on a sale, including supplier and customer details, invoice number and date, description of the supply, and the VAT rate and amount.

The form, known as VAT100, on which a registered business reports sales and purchases figures, output tax and input tax for an accounting period, and works out the VAT payable to or repayable by HMRC.

The period covered by a VAT return. Most businesses use quarterly periods, but monthly returns can be agreed with HMRC and annual accounting is available under a scheme.

A VAT scheme in which output tax is declared when customers pay and input tax is reclaimed when suppliers are paid, rather than on invoice dates. It is open to smaller businesses within a turnover limit.

A scheme letting smaller businesses send one VAT return a year and make nine interim payments during the year, easing administration and helping cash flow.

A simplified scheme where a business still adds VAT to its sales at the normal rate but pays HMRC a single flat percentage of its gross turnover instead of deducting input tax.

The position of a business that makes both taxable and exempt supplies. It can recover input tax linked to taxable supplies, but input tax on exempt activities must be apportioned and partly disallowed.

A document issued to a customer to reduce the amount owed, for example after goods are returned or a price was wrong. It reduces output tax already declared.

A claim that lets a business recover output tax already paid to HMRC on a sale where the customer has not paid within the set period, usually six months after the invoice date.

HMRC's requirement that VAT-registered businesses keep digital records and file VAT returns using compatible software, so figures are sent from the accounting system rather than keyed into a portal.

Pay As You Earn: the system under which an employer deducts income tax from employees' pay during the year and pays it to HMRC, spreading the tax bill across the year.

The amount of income an individual can receive free of income tax in a tax year; it is reduced for people whose income exceeds the higher limit.

A number and letter combination issued by HMRC that tells an employer how much tax-free pay an employee is entitled to in a period, so the correct PAYE deduction is made.

National Insurance deducted from an employee's earnings once they exceed the primary threshold, charged at a set percentage up to the upper earnings limit and at a lower rate above it.

National Insurance an employer pays on an employee's earnings above the secondary threshold; it is a cost to the business and is not deducted from the employee's pay.

The minimum payment an employer must make to an eligible employee who is off work sick, paid for a limited number of weeks and subject to qualifying conditions and waiting days.

The payment an employer makes to an eligible employee on maternity leave, paid for a set number of weeks at a higher rate for the first weeks and a flat rate afterwards.

Amounts taken from an employee's pay through PAYE when their earnings exceed the repayment threshold for their loan plan, and paid to HMRC alongside tax and National Insurance.

A reduction in an employer's annual National Insurance bill, available to eligible employers, which can be claimed through payroll each month until it is used up.

The end-of-year form on which an employer reports expenses and benefits provided to employees; the related Class 1A National Insurance is reported on form P11D(b).

HMRC's system requiring employers to send payroll information to HMRC on or before each payment to employees, rather than only at the end of the tax year.

The RTI submission sent to HMRC each time employees are paid, showing pay, tax, National Insurance and other deductions for every employee in that payment.

An RTI submission used to tell HMRC about things that reduce or adjust the amount payable, such as statutory recoveries, the Employment Allowance, or that no employees were paid.

The form given to an employee when they leave, showing pay and tax to the leaving date; the new employer uses parts of it to set up the employee's payroll record.

The end-of-year certificate an employer must give every employee who is still employed at 5 April, summarising their total pay and tax for the tax year.

A form completed by a new employee who does not have a P45, giving the employer the information needed to decide a starting tax code.

A written statement given to each employee at or before payday showing gross pay, deductions and net pay, and, for hourly-paid staff, the hours worked and rate of pay.

The date by which PAYE tax and National Insurance for a pay period must reach HMRC, normally the 22nd of the following month (the 19th if paying by post).

A charge made when an employer sends its Full Payment Submission after the payment date, starting with a fixed amount and increasing with the number of employees and repeated failures.