Tax & accounting glossary
Plain-English definitions of the UK tax and accounting terms you'll meet in TaxOptimiser.
Assets
Assets are resources owned or controlled by a business or individual that have economic value and are expected to provide future benefit, such as cash, property, equipment, stock or receivables. For accounting purposes, they are typically classified on the balance sheet as either current assets (held short-term) or non-current/fixed assets (held long-term).
Balance Sheet
A balance sheet is a financial statement that shows a business's assets, liabilities and equity at a specific point in time, providing a snapshot of its financial position. In the UK, it forms part of the statutory accounts filed with Companies House and HMRC.
Trial Balance
A trial balance is a bookkeeping report that lists the closing debit and credit balances of every account in the general ledger at a given date, with the two columns expected to total to the same figure. It is used to check the arithmetical accuracy of the double-entry records before preparing the financial statements.
VAT
VAT (Value Added Tax) is a consumption tax charged on most goods and services supplied in the UK, currently at a standard rate of 20%, with reduced and zero rates applying to certain items. Businesses with taxable turnover above the VAT registration threshold must register with HMRC, charge VAT on their sales, and submit regular VAT returns.
VAT exempt
VAT exempt refers to goods and services on which no VAT is charged and for which the supplier cannot reclaim VAT incurred on related purchases. Businesses making only exempt supplies generally cannot register for VAT.
VAT Return
A VAT Return is a form submitted to HMRC, usually every three months, showing the VAT a business has charged on sales and paid on purchases during that period. It is used to calculate whether the business owes VAT to HMRC or is due a refund.
VAT Reverse Charge
The VAT reverse charge is a mechanism where the customer, rather than the supplier, accounts for the VAT on a transaction directly to HMRC. It commonly applies to certain construction services under the Construction Industry Scheme and to some cross-border supplies of goods and services.