VAT (Value Added Tax) is an indirect tax which is levied on the sale of goods and services by UK and EU VAT registered businesses. In the UK, VAT is collected on behalf of HM Revenue & Customs by VAT registered entities. All services and goods are either VAT rated or VAT exempt. VAT is charged on goods and services at different levels. Standard rate 20% applies to most goods and services. Reduced rate 5% applies to some goods and services such as children’s car seats and home energy and zero rate applies to most food and children’s clothes.