SSAP 5 Accounting for Value Added Tax
SSAP 5 seeks to achieve uniformity of accounting treatment of value added tax (VAT) in financial statements.
In the UK and the Republic of Ireland, VAT is a tax on the supply of goods and services that is eventually borne by the final consumer but collected at each stage of the production and distribution chain. As a general principle, therefore, the treatment of VAT in the accounts of a trader should reflect his role as a collector of the tax and VAT should not be included in income or in expenditure whether of a capital or revenue nature. There will, however, be circumstances in which a trader will bear the VAT, and in such cases where the VAT is irrecoverable, it should be included in the cost of the items reported in the financial statements.
SSAP 5 is effective for accounting periods starting on or after 1 January 1974.