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
> 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?
It’s a bit more nuanced than that – the ultimate aim is for the VAT to be paid by the consumerretail end. So I buy raw materials at £10+VAT but make something out of it (or just sell it on to retail) at the higher price of £20+VAT. It is the last one that the government eventually gets, the previous steps (plus any other items purchased as part of that process) are all reclaimed.
Otherwise the raw itemservice would be taxed at every step and that would be cost prohibitive.
Latest Answers