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
Value Add Tax.
Customer pays 20 extra on a 100 item: 20%
If you got the item at 60, then you added 40 of value.
You will collect 20, but you reclaim 12 from your purchase (you paid 60+12vat) . So, you paid just 8 total, which amounts to 20% of 40, the value you added to the product.
This way, each step pays vat more or less corresponding to their raw margins. Plus you.can use all steps in the supply chain to control each other.
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