What is output VAT?

In practice, in the UK

Getting output VAT right starts with classifying the sale correctly, since standard-rated, reduced-rated, zero-rated and exempt supplies are all treated differently even though only some of them involve charging VAT at all. A business that assumes every sale is standard-rated will overcharge customers on anything that should be zero-rated or exempt, while one that assumes the opposite risks under-declaring VAT it should have charged. The place of supply matters too: a sale to a customer outside the UK is not automatically treated the same way as a domestic sale, and getting this wrong changes whether output VAT applies at all. Output VAT is due at the point HMRC’s rules treat the supply as having taken place, which is not always the invoice date.

In Odoo

Odoo applies output VAT automatically once a sale is linked to the correct tax position, so most of the work sits in setting up products, customer records and tax positions correctly rather than in the invoice itself. A product or customer left with the wrong default tax position will silently generate the wrong output VAT on every invoice raised against it until someone notices.

Common mistakes

• Defaulting every sale to the same VAT treatment instead of checking whether it is zero-rated, exempt or standard.
• Misjudging the place of supply for a sale to a customer outside the UK.
• Leaving a product or customer record with an outdated tax position after a change in VAT treatment.