Value-added tax (VAT) is a relatively new tax. In the UK, it was introduced on 1 April 1973. However, it accounts for about 17% of the UK government’s total revenue.
As the name suggests, VAT is a tax on value-added. A businessman collects VAT on sales while paying VAT on their purchases. The net VAT collected from customers less VAT paid to suppliers is payable to HMRC by the businesses. Generally, residential landlords do not need to worry about VAT. However, as we will discover later, landlords and property developers may be able to claim the VAT they paid for the building works carried out by them.