How does the UK VAT system work?

Question

this concerns UK Tax for 2006 I think.
The VAT 17.5%

i'm doing my tax assignment so pls put aside all ur anger or whatever. coz i have 2 hand it in tomorrow. Thank u

Answer 1

VAT is beaurocrat speak for a sales TAX, VAT exisits in all European Union member states, but at differing levels. The EU takes a flat percentage off the VAT revenue for its own purposes. I forget the current amount but its somewhere in the region of 1 to 1.5%

essentially there are 3 bands of the tax in the UK
Exempt - items which do not attract any tax (most foodstuffs, government taxes (eg Vehicle Excise Duty, Licenses), newspapers
Zero Rated - items which notionally are included in the VAT
legislation but at present he UK government doesn't levy any tax (I think this includes childrens clothing)
Standard Rate - currently charged at 17.5% (most items including luxury foods [including chocolate biscuits but not standard plain biscuits])
-there used to be a 4th band the fuel rate but that was abolished in 1997.

If VAT registered business buys goods which attract VAT they can reclaim that VAT from the government. It must add VAT to any sales it makes in relevant categories. The only exception is goods which are being exported, where some business have a dispensation not to charge VAT if the goods can be demonstrated to be intended for export.

Theoretically VAT can only go up, according to the relevant EU legislation however this can be overridden by the EU if it so permits. As was done when Labour decided to repeal the Fuel duty tax rate. In theory any goods bought in th EU duty paid (ie VAT & local taxes) can be imported accross EU borders without further taxation

VAT registered business's need to produce a quarterly account to the revenue detailing the amount of purchases including VAT and the amount of goods and services sold including VAT. the difference between the 2 is then settled either way.

The VAT legislation leads to some strange anomolies - for example most universities, schools and colleges are not VAT registered and so cannot reclaim VAT on their purchases. New build housing doesnt pay VAT, yet house extensions and repairs do.

Answer 2

This is all UK facts - VAT exists elseqwhere in the world too

VAT is 17.5 %

If I buy items I will have to pay VAT on them at 17.5%
There are certain exemptions, childrens clothing, books, magazines are some exceptions.

If I were a business I still pay VAT on things I buy but I get to claim it back from the government.

Answer 3

Value Added Tax (VAT) is mainly 17.5 %, although on some things it's 5%, and some things are zero rated.
People who sell things have to work out how much tax will be charged, and add it on to the price they charge you. It's then collected from them by the government.
There's loads of info about it at the HM Revenue and Customs Website:

Answer 4

The UK VAT system is a 'Value Added Tax'

The manufacturer must add 17.5% to his bill when selling goods to a WHOLESALER. The VAT portion must then be passed on to the Inland Revenue by the manufacturer.

The wholesaler must add VAT on to his price to the RETAILER (Including the VAT paid to the manufacturer). The VAT portion must then be passed on to the Inland Revenue by the wholesaler.

The retailer must add VAT on to his price to the CUSTOMER (Including the VAT paid to the wholesaler). The VAT portion must then be passed on to the Inland Revenue by the retailer.

The manufacturer, wholesaler and retailer, during the course of these transactions, have each included their profit margins.

Also, if a delivery or installation charge is applied then VAT is added to these charges.

Money for old rope!

Answer 5

Unlike in the states, the price you see on the shelf already includes the VAT in the price. It is not added at the register like in the states, so often you don't even know how much VAT you are actually paying. I like it much better with the taxes added, it makes adding up how much your purchase will be much easier.

Answer 6

1

Answer 7

all business collect the VAT for the inland revenue, which is government department

Answer 8

basically, for everything you do, the government rapes 17.5% of it out of your back pocket - except knitting

Answer 9

steals from the poor to give to the rich

Answer 10

By taking money off us!