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
VAT is a consumption tax, which means that it’s intended use is to be levied only on the total economy, not the intervening steps.
You’re able to reclaim VAT because you run a business. This means that you also charge your customers VAT, and they’ll charge theirs, and so on, until you get to someone who has no customers (the end consumer). The full burden of VAT then falls on this consumer, and not the intermediate steps in the supply chain, even though it’s collected at each step.
Look at what you can claim back the VAT for. It’ll be things like office supplies and inventory, which are used to supply your products to your customers (Even if you’re not selling them your work computer, you’re still using the computer to sell to them, and the cost is included in the price you charge.) If you also buy, say, a bottle of rum for personal use, you won’t be able to claim back the VAT on that (if you do, that’s fraud), and so you pay all the VAT on that.
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