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Exclusive: UK VAT rates and VAT FAQs



UK VAT rates and VAT FAQs

#VAT #rates #VAT #FAQs

For your business, you are probably charged VAT on most of the goods and services you buy.

That means charging your customers VAT, keeping VAT records and paying the VAT you’ve collected to HMRC.

Read this article to learn more about VAT.

Here’s what we cover:

What is VAT?

Value Added Tax, or VAT, is a tax applied to goods and services.

Sometimes VAT is called a consumption tax, because it’s applied to end consumer purchases.

It’s applied by the individual or business selling the goods or services as a percentage on top of the sale price. In other words, if something is sold for £1, then the price charged to the consumer will be £1.20 (if the 20% standard VAT rate is applied).

VAT is important because it’s one of the biggest single forms of government revenue, representing 6% of national income. Worldwide, it accounts for 20% of tax revenue for governments.

It’s important for businesses because registering for VAT often lets them reduce the amount of VAT they pay on their own purchases.


In the UK, VAT is applied by businesses or individuals on behalf of the government. The business or individual must report the amount of VAT they’ve both collected and also paid via periodic VAT returns.

Typically, these are submitted every three months (quarterly), but some businesses submit them monthly or annually.

Following submission of the VAT Return, the business or individual must pay the balance of the VAT to the government. That is to say, they pay the VAT they’ve collected minus the VAT they’ve been charged by others.

Only businesses or individuals that have registered for the VAT system can charge VAT. Registration is mandatory once the turnover of the business reaches £85,000.

But it’s also possible to voluntarily register for VAT if your turnover is lower than this.

What is the UK VAT Rate 2022/23?

There are three rates of VAT that are applied depending on what’s being sold.

Sometimes, the situation in which the goods or services are being sold can affect which rate is applied, too.

For example, some disability products can be zero-rated for VAT – but only if they’re sold to people who are disabled.

This is what the current VAT rates are:

It’s important to understand that zero rated isn’t another way of saying something is exempt from VAT, or VAT-free.

You still have to make a note of zero-rated sales or purchases in your VAT accounting, and issue correct VAT invoices if they’re required.


Let’s take a look at how much is VAT in the UK.

John Smith runs an eBay shop selling computer parts he imports from China. One of them costs him £90, and he adds a 30% profit margin.

That brings the retail price up to £117.

When he sells this, he adds 20% VAT, bringing the price up to £140.40.

He works this out by simply multiplying his sale price by 1.2 (and if he wanted to work out a price for something he’s buying minus its VAT component, he could simply divide the price by 1.2 instead – assuming the 20% standard rate applies).

If John sells to another VAT registered business then he still charges VAT in the same way.

However, this is considered input VAT by the purchasing business, and they can use it to offset the VAT they’ve collected on their sales.

John must provide them with a correctly formatted VAT invoice, showing the rate and amount of VAT applied, among other things.

How VAT has changed

VAT was introduced into the UK in 1973 but had been used in Germany and France from the 1950s onwards, where it was sometimes referred to as a goods and services tax (GST).

This is how countries such as Australia, New Zealand and Canada continue to refer to their own VAT-like tax.

Upon introduction in the UK in 1973, the standard rate was 10%. Since then it’s risen and occasionally fallen.


Today’s rate of 20% is the highest that’s ever been applied and has been maintained for a decade, despite continuing political pressure to reduce it.

At one point in UK tax history there was even a higher rate of VAT, charged at 25% (although reduced to 12.5% a little later).

This applied to petrol and items considered luxuries such as fur coats, hi-fi equipment, televisions, and jewellery. However, this rate was abolished in 1979.

Here’s the historic standard VAT rates, starting with the introduction of VAT in 1973:

VAT rates

And here’s the historic VAT rates for the reduced rate, which is much more straightforward:

VAT rates

Who pays VAT?

VAT is paid by consumers on purchases they make from VAT-registered businesses. As such, it’s an end-user tax applied at the point of consumption.

When it comes to handing VAT to the government, that’s the responsibility of VAT-registered individuals and businesses.

They pay the VAT to the government after filing their monthly, quarterly or annual VAT Returns.

Until the deadline for payment, which is usually one month and seven days after the end of the VAT period, the business gets to hold on to the VAT money.

And there’s nothing wrong with putting it into a high interest account, or even using it to help with cash flow (e.g. effectively giving a short term loan to yourself).

You just have to make sure the money will be available when it’s needed to pay the VAT bill.

VAT is one of a small number of tax systems that turn businesses into unpaid tax collectors for the government.

However, the benefits of being able to claim back tax spent on purchases makes this worthwhile.


What is the UK VAT registration threshold?

Businesses with a VAT taxable turnover above a certain amount must, by law, register for VAT.

The exception to this is if the business only sells goods or services that are exempt from VAT.

The current VAT threshold is £85,000. If your turnover for which VAT applies goes over this, you are required to register for VAT.

The government says there are fundamentally two ways to measure if you’ve passed the threshold, or will do so soon.

Either can be true to require you to register for VAT:

  • You anticipate going over £85,000 in VAT taxable turnover in the next 30 days.
  • Your VAT taxable turnover was more than £85,000 over the past 12 months (a rolling 12 month period from today’s date, rather than a calendar year).

It can be difficult working out when you should register for VAT. Speaking to your accountant can help because they can help forecast your income for the coming period.

But what’s known as the VAT trap arises when a business finds itself crossing the VAT threshold, yet without having charged VAT to customers and without the required VAT accounting.

How to pay your VAT bill

When it comes to handing over the VAT payment to HMRC, you have several options.

Most businesses use direct debit.

This simplifies things significantly and means you needn’t think about it, other than ensuring the funds are available in the correct account at the right time.

However, if you want to keep more control over payments then other options are available, as follows.

But you must remember that some payment methods take up to three working days to be processed (including direct debits), and there might be surcharges too.


Making Tax Digital for VAT simplifies the whole procedure around collecting and reporting VAT by requiring the use of software. This makes it a cinch to know when payments are due. You can learn more about MTD by visiting our MTD hub.

Same day payments

  • Online (Faster Payments, CHAPS or via bank transfer using online banking)
  • Telephone (Faster Payments)

Up to three working days

  • Online (BACS or via debit or corporate credit card)
  • Direct debit
  • Standing order (only for Annual Accounting Scheme, or payments on account)
  • In person at your bank or building society

You may need to speak to your bank or building society ahead of time to see if they’re signed up to the Faster Payments system.

How to charge VAT

Charging VAT is pretty simple. You just add the relevant VAT percentage to your sale price, which the customer then pays.

For example, you charge the customer £12 for a widget that costs £10 and has VAT applied at the standard rate of 20% (i.e. £10 + 20% = £1.20).

There’s no legal requirement to list prices including VAT but not doing so might incur the wrath of the Advertising Standards Authority.

Because not including VAT in listed prices is so common, they include the requirement in their Committee of Advertising Practice guidelines.

However, if you mostly sell to other businesses, you might list prices without VAT provided this is clearly indicated.

If your customer is also VAT registered then you must provide a VAT invoice. This differs from standard or basic invoices because, by law, it needs to contain additional information.

For those using the basic VAT system, it should include the following:

  • A unique invoice number.
  • The time of the supply (that is, the goods or service you sell).
  • The date of issue of the document (required only if this is different to the time of supply).
  • Your name, address and VAT registration number.
  • The name and address of the person to whom the goods or services are being supplied.
  • A description sufficient to identify the goods or services supplied. Each description should list the quantity of the goods or the extent of the services, and the rate of VAT and the amount payable, excluding VAT.
  • The total amount payable, excluding VAT.
  • The rate of any cash discount offered.
  • The total amount of VAT chargeable, expressed in sterling.
  • The unit price.
  • The reason for any zero rate or exemption.

Understanding VAT terms and phrases

VAT has its own terminology, which can be very confusing. So here’s some simple definitions to help you get to grips with charging, reporting, invoicing and paying VAT.

Input VAT

The VAT you pay on purchases that you can subsequently claim.

Output VAT

The VAT you charge on sales.

VAT Return

The periodic tax returns you must submit to HMRC as part of your VAT obligations. Nowadays this must be done digitally, via software, as part of the Making Tax Digital for VAT rules. The VAT Return contains nine boxes that you fill in, as applicable.


VAT period

The period for which you calculate and then report VAT via a VAT Return. Typically this is quarterly (every three months), but it can be monthly or annually depending on the needs of your business.


The goods and services you sell. For example, if you sell a widget to a consumer, then you have made a supply.


The goods or services you buy to which VAT is applied by the seller.

Flat rate scheme

An alternative to calculating VAT where you instead apply a flat rate percentage to your total turnover. This makes things simplifier but could mean you end up handing over more VAT than you would otherwise.

Tax point

The date when the supply of goods or services is deemed to have taken place for the purposes of VAT accounting.

VAT invoice

An invoice that lists items such as the rate and amount of VAT, plus your VAT registration number. Supplying one each time isn’t a legal requirement but customers can request one, and any individual or business that’s VAT-registered should do so.


The turnover amount for you or your business beyond which you’re legally required to register for VAT. Currently this is £85,000 and it applies only to the VATable goods or services you sell (this should be applied to total VATable turnover and not just profits). The threshold typically increases yearly.

Retail schemes

Several alternatives to calculating VAT that simplifies VAT accounting for retailers. Included is the point of sale scheme, which lets you more easily calculate VAT from your daily gross takings (DGT). It also includes two direct apportionment schemes, and two direct calculation schemes.

VAT registration number

The individual number that applies to your business and identifies it for VAT accounting purposes.

Distance selling

Before Brexit, sales to countries in the European Union (EU) were referred to as distance sales. Following Brexit, only sales from Northern Ireland to the EU are considered distance sales for UK businesses. Sales to EU countries from Great Britain and considered exports.

One Stop Shop

A scheme by which you can account for VAT in a single return when selling to consumers within EU countries.


Final thoughts: Getting to grips with VAT

VAT can be confusing but getting to grips with it takes only a little effort, and once you’ve learned what you need to know you can get on with your business just like thousands of others in the UK.

Don’t forget that seeking expert help is always a good idea.

Accountants and other tax experts work with VAT day in, day out. Speak to them if you’re struggling with any of the details, or how to implement VAT within your business.

Editor’s note: This article was first published in August 2017 and has been updated for relevance. 


Exclusive: New York-based grand jury issues subpoenas to Truth Social SPAC board members –




New York-based grand jury issues subpoenas to Truth Social SPAC board members

#Yorkbased #grand #jury #issues #subpoenas #Truth #Social #SPAC #board #members

Plans for a Special Purpose Acquisition Company (SPAC) merger for Donald Trump’s media group could have hit roadblocks with a New York-based federal grand jury sending subpoenas to members of the company’s board.

According to a new SEC filing, these subpoenas have requested documents related to “Digital World’s S-1 filings, communications with or about multiple individuals, and information regarding Rocket One Capital.”

The SEC had made inquiries about the acquisition corporation last December about its anticipated merger with Trump Media & Technology Group (TMTG), the owner of the Truth Social platform.

Digital World Acquisition Corp (DWAC), the blank check company, said in the filing that these requests could “delay the effectiveness of the Registration Statement, which could materially delay, materially impede, or prevent the consummation of the Business Combination.” 

Truth Social launched to the general public in February on the App Store, but many folks had a lot of trouble getting into the social network, with waitlists going up to 100,000 users. In May, the company launched a web app, but there’s no Android version in sight. 

Trump currently has more than 3 million followers on Truth Social — which is much lower than more than 88 million he had on Twitter when he got banned from the platform last year.

Notably, the former US President has a special deal with Truth Social, which bars him to cross-post something on other social networks for six hours. So even if Elon Musk unbans Trump after he takes over Twitter, the account will just likely repost content from Truth Social after a delay. 


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Exclusive: Stocks making the biggest moves premarket: Spirit Airlines, BioNTech, Robinhood and more –




Stocks making the biggest moves premarket: Spirit Airlines, BioNTech, Robinhood and more

#Stocks #making #biggest #moves #premarket #Spirit #Airlines #BioNTech #Robinhood

Check out the companies making headlines before the bell:

Spirit Airlines (SAVE) – Spirit Airlines lost 4.7% in the premarket after saying it would accept the latest improved takeover bid from Frontier Group (ULCC). The latest Frontier cash-and-stock bid is valued at $2.7 billion based on Friday’s closing prices, while the most recent JetBlue (JBLU) all-cash offer is worth $3.7 billion. Spirit believes it is unlikely regulators would approve a combination with JetBlue, a notion that JetBlue has disputed. Frontier lost 1.7% while JetBlue was unchanged.

BioNTech (BNTX) – BioNTech added 2.1% in premarket trading after the drug maker and partner Pfizer (PFE) said their omicron-based Covid-19 booster shots generated an improved immune response against the variant.

Robinhood Markets (HOOD) – Robinhood rose 2.5% in premarket action after Goldman Sachs upgraded the trading platform operator’s stock to “neutral” from “sell” although it cut the price target to $9.50 per share from $11.50. The rise comes despite the release of a Congressional report detailing the trading platform’s difficulties in handling the meme stock frenzy of January 2021.

Digital World Acquisition (DWAC) – In an SEC filing, the SPAC linked to former President Donald Trump’s media company said additional subpoenas were issued in an ongoing probe of its registration statement regarding the proposed business combination. Digital World said the investigation could materially impede, delay or even prevent the combination from being consummated. The stock slid 5.8% in the premarket.

Coinbase (COIN) – The cryptocurrency exchange operator saw its stock slide 5.3% in the premarket after Goldman downgraded it to “sell” from “neutral,” pointing to the continued fall in crypto prices and slower industry activity levels.

Altria (MO) – Altria rose 1% in the premarket after Juul won a temporary stay of the FDA ban on its e-cigarette products. Altria holds a 35% stake in Juul.

Newmark Group (NMRK) – The commercial real estate firm’s shares rose 1.6% in the premarket after the New York Post reported on increasing talk of a possible merger between Newmark and rival Cushman & Wakefield.


Walgreens (WBA) – India-based conglomerate Reliance Industries is reportedly in talks with global lenders to raise $8 billion to finance the purchase of Walgreens’ Boots drugstore chain. Walgreens added 1% in premarket trading.

Chewy (CHWY) – Chewy jumped 4.1% in premarket action after Needham upgraded it to “buy” from “hold,” saying that price increases for the pet products retailer are sticking and that supply chain issues are improving.

AutoZone (AZO) – The auto parts retailer was upgraded to “buy” from “neutral” at Goldman Sachs, which called it a good defensive play as the vast majority of auto parts sales are non-discretionary and demand remains relatively inelastic. The stock gained 1.9% in the premarket.

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Exclusive: How to support your employees as the world of work evolves –




How to support your employees as the world of work evolves

#support #employees #world #work #evolves

The world of work is changing rapidly and, as the owner of a small or medium-sized enterprise (SME), you need to respond.

Technological advances, the war for talent, and remote and flexible working have all accelerated due to the pandemic and workers changing jobs in record numbers, known as the Great Resignation.

Smart small business owners are adapting quickly by developing and creating new roles for workers as the requirements for some positions become automated.

They are also boosting learning and development opportunities, improving communication techniques, and supporting well-being and job and career security.

In this article – which follows on from part one, Redefining how your people work in the post-pandemic world – we highlight how you can do the same for your small business.

Here’s what we cover:

Creating new roles in the business

The Great Resignation continues to threaten SME business models, with more than half of employees (54%) considering leaving their job in the next 18 months, according to research by MetLife.

If you can evolve and create new roles, this can help persuade employees to stay.

More flexibility in hours, conditions and location, plus remote or hybrid working options are key tools of persuasion.


How these changes affect roles depends on each company and individual, so the key is to try different things to see what works for your firm.

As Steve Cadigan, talent adviser and author of Workquake, says: “Battling for top talent forces you to be creative.

“Experimentation has become best practice.”

Some companies, including SMEs, are doing away with offices completely.

Others are going further by building all remote workforces across multiple timezones, which requires so-called asynchronous communication (async).

Async focuses on transparent documentation and collaboration tools. These allow people in different time zones to work together without having to be ‘always on’.

Moving towards that model also requires much experimentation, including figuring out who should work synchronously and asynchronously and how to combine the two.

In general, more traditional ‘sync’ roles are for those who need real time and in-person communication. These may include executives, new hires, and client-facing and culture-building roles.

Async is for those who can mostly work remotely and without real-time communications, such as coders and project workers.

But the move towards all-remote workforces and async communication will be among the biggest changes for employers and employees over the next few years.

So many more roles will likely be created or adapted to work that way.


A related trend is that remote, hybrid and async working are all accelerating the march towards automation, which will change the requirements for a significant number of jobs in the next 10 years.

Such technological advances will force SMEs to evolve roles and create new ones even more rapidly.

According to Brookings Institute, technological advances are creating new jobs, including some well-paid roles for highly educated workers who can develop skills that complement technology.

These include creative, analytical and communication roles.

Those with post-secondary education or qualifications will fare better, which is a challenge for SMEs because they tend to have more and wider shortages of graduates than larger employers.

Kevin Daniels, professor of organisational behaviour at University of East Anglia (UAE) and co-creator of the Evolve Workplace Wellbeing website, says the drive to automation should not just increase efficiency but how people experience work.

“Organisations that do it well make the jobs interesting, and ask employees to use their skills to solve problems and innovate, even in small ways,” he says.

“They also ensure they’re not doing the same thing every day and can see their work evolving.

“If people can see the results of their performance and how they benefit customers and society, that also helps a lot.”

For example, in a call centre, employees might only be allowed 30 seconds per call. Or they may triage calls but never find out if and how the problem was solved.

Neither are satisfying for the employee.


Career development and upskilling

In fact, all SME workers will likely need more education and training in skills that complement technology and other workplace changes.

Some of the UK’s educational structures, whose roots go back more than 200 years, aren’t suited to the skills workers need in this rapidly changing environment.

This is leading some SMEs to invest more in lifelong learning for their employees.

But many do not have the budget for in-depth training.

If that applies to your company, you may focus on cheaper learning opportunities such as job shadowing, coaching and mentoring, stretch assignments, and job enlargement and enrichment.

Addressing concerns around job and career security

It’s a significant challenge for SMEs because lifelong learning has become critical to job and career security, says Steve Cadigan.

“I don’t think people want job security anymore, they want career security,” he says. “That’s why talent has become loyal to their learning, not your company.

“They think, ‘The more I learn, the more secure my career becomes, and the less vulnerable I am in my current firm.’”

If you grow them, they might just stay.

If they feel they can grow elsewhere, they will likely leave.

This is a major shift in how people think, says Steve.


He adds: “The key is to find ways to build learning into the job. That is not a day when a professor comes in. It’s new projects, leaders, teams, assignments and roles so you learn while contributing.

“It’s a big stretch for many companies.”

Supporting employees with flexible, remote and hybrid working

Employees also need a wide range of support structures to cope with more flexible working practices (employers can use cloud HR software to manage these structures).

According to Heejung Chung, author of The Flexibility Paradox, flexible working brings a range of challenges, such as leading employees to work even harder and let work encroach more on family life.

Some claim that, if not carefully managed, flexible working can also widen gender inequalities.

SMEs planning to offer more flexible working need support tools and policies to help avoid such effects or bolster existing ones.

One way to address these challenges is to give leaders and managers more time to focus on supporting teams and individuals.

If you and your managers can act like coaches to your team and give them more decision-making autonomy, that should improve engagement in the more flexible world of work.

Heejung also suggests communicating clearly that employees will not receive worse evaluations just because they work from home.

Measure their value and productivity as objectively as possible. Actively encourage good work-life balance and boundary setting for example, around non-availability on email.

With a hybrid model, in-office days should not look like working from home days, for example, with lots of videoconference meetings, adds Heejung.


Instead, make sure people interact and bond, for example, by protecting and encouraging watercooler chats.

Use the time for brainstorming and decision-making. Save more individually focused or online work for home.

Improving communication for remote working

Claire Trachet, founder of advisory firm Trachet, says the move to remote and hybrid working also requires specific changes to the way employees communicate.

“SMEs need to focus on fluid and regular communication between remote working teams and people,” she says.

“Too often, people become siloed as companies stick to the cadence of meetings they had when working in person.

“For example, with remote work, they need to reduce the time spent on check-ins, but make them more regular to foster connectivity.

“SMEs should also give people clear goals for each day or week.

“This enables staff to feel a sense of accomplishment each day, then disconnect. Companies should also adopt technology platforms that support remote working through workflow, communication and other business functions.”

Since the pandemic, isolation has become an increasing challenge.

Many companies are missing the benefits of informal interactions and are still looking for ways to replicate them.

Intentionality has become important because face-to-face interactions happen naturally in an office. In a remote team, you need to actively promote informal communication that builds bonds and camaraderie.


For example, technology firm GitLab encourages recruits to have online coffee chats and other social interactions to get to know people outside their team.

Another tip is to ensure everyone is included in decisions and everything is documented transparently to promote inclusion.

Remote working does not mean people never meet.

They should always have occasional opportunities to travel and meet in person.

Bruce Daisley, former Twitter vice president and author of Eat Sleep Work Repeat, says there’s no one-size-fits-all solution.

“Companies might suggest phoning each other more regularly,” he says. “But half the company may resist that. So just try different things and allow people to vary if they don’t work.”

Supporting employee well-being

According to the MetLife study, 39% of employees would remain with their employer if they showed more care for their mental well-being.

Bruce says one danger of homeworking is employees save time on commuting but are giving some of that back to employers by working longer hours and feeling “always on”.

These factors increase the risk of burn out and stress, which can be harder to notice in a remote team.

GitLab suggests corporate leaders address this by promoting a non-judgemental culture and training and encouraging teams to prevent and report burnout.

Managers should also not celebrate working long hours or allow them to become the norm.


Kevin Daniels says: “As an SME owner, monitoring employee working hours, and reducing when necessary has to be a priority.”

He highlighted UEA’s Good Jobs Project 2021, which addresses this and other well-being issues. It says every company needs to start with a foundation of respect for employees that includes fair pay, hours and conditions.

The project proposes four further ways to boost employee morale:

  • Care about workers’ lives. This includes offering predictable shifts, learning opportunities, and flexibility around childcare.
  • Include them in conversations. And listen to their concerns.
  • Have workers’ backs. This includes avoiding blame, training to deal with difficult situations, and support when things go wrong
  • Let them connect. Give them discretion and time to take pride and meaning from supportive interactions with customers and colleagues, and allow for unscripted interactions.

These points are not in conflict so should be a ‘win-win-win’ for workers, customers and employers, says the project.

Kevin emphasises that you don’t have to be a huge company with expensive benefits, such as gym memberships or mindfulness training, to look after employee well-being.

Much support can be informal, simple, quick and inexpensive.

For example, there’s evidence that simple things such as installing the Headspace app or allowing staff to go for a walk at lunchtime improve well-being.

“The biggest challenge SMEs cite in improving staff well-being is not usually financial, it’s mostly about time and priorities,” says Kevin.

“But we found organisations have got better at listening to employees’ needs due to the pandemic.

“Firms also worry about opening a can of worms by discussing mental health.

“It’s a learning process to get over that and accept you might not get it right first time, but it’s important to try, so employees know you care.”

Reviewing contract requirements

Reviewing employees’ contracts to reflect changes such as flexible, remote or hybrid working can be complicated.


Huw Cooke, a senior associate in the employment law team at Burges Salmon, says that where employees can do their jobs from home, most employers are not changing the place of work in their contract, but are introducing a hybrid working policy.

“This avoids the need to change employment contracts and gives the employer flexibility if the working model needs adjusting,” he says.

“However, employers need to check contracts to avoid unexpected consequences, such as an expenses clause that applies wherever an employee lives.”

Employers also need to ensure that other clauses, such as around health and safety and data protection are suitable.

“However, many of our clients report that job candidates want specific working arrangements written into their employment contracts,” Huw adds.

“In this competitive market, employers may have to make legally binding commitments about working arrangements.”

The CIPD has produced a detailed review of employment law essentials for home and hybrid working.

Final thoughts: Meeting the challenge of redefining work

The changing world of work does not always benefit employers’ relationships with staff.

According to MetLife, 62% of employees and 72% of employers feel their relationship with each other changed, with one in three employers feeling it has weakened.

This helps explain the Great Resignation and is a concern for SMEs desperately trying to fill vacancies and hang on to valuable staff.

It may be hard work and expensive to redefine work and evolve roles to benefit employees and the business.


But if you can achieve that balance, through some of the measures discussed here, you have a much better chance of strengthening relationships with staff, tackling the talent gap, and building a more robust and sustainable workforce.

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