Value added tax, or VAT as it is more commonly known, is paid when you buy goods and services within the European Union (EU), including the UK. Where VAT is payable it is usually included in the price of the goods or services you buy, although not all goods have VAT on them.
Each country in the EU sets its own VAT rate and in the UK there are three different rates - standard rate, which is currently 17.5% and is paid on most taxed goods and services; reduced rate, which is 5% and applies to necessities such as children's car seats and domestic fuel or power, and zero rate, which means you do not pay any VAT on those goods. These include certain foods, books, newspapers and magazines, children's clothes, and equipment for disabled people.