I don’t get it. Does it have a different purpose in retail than it does business?
In business, if I sell you a service for £100 and have to add 20% VAT then that 20% gets paid to the government, though if I buy something for £120 (inc. VAT) I can reclaim that 20% back from the government anyway, so what was the point of money changing hands in the first place?
Is it not 1:1 transactions, on a large scale? I guess ideally people are selling more than they’re buying? Does the government end up in credit, and it’s a form of tax collection, the price of doing business? Then why make it that I can reclaim VAT back on purchases and not just keep the whole lot?
Asked my Book Keeper this who said it was a good question nobody’s ever asked before, and didn’t have an answer. “I’ve got the worst f**king lawyers”
In: 6
One interesting aspect is that some things are sold without VAT — food, medical supplies, etc.
So if I run a company that makes cycles out of steel pipe, spoked wheels, and roller bearings, I pay some VAT to my supplier, and recover more VAT from my customer, and pay the difference to the VAT collector.
If you run a company that makes wheelchairs out of exactly the same components, then you pay the same VAT to your supplier, but your customer does not pay you any VAT because wheelchairs are exempt. So you get to reclaim the VAT you paid out for the parts, from the VAT system.
There are a lot of dark corners where people can cheat the system.
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