vat

[admin]

wonder if any one can give me a clue? I am having my kitchen done, the company have just bought all the white goods which I have chosen, but then on their invoice the have added vat, has the vat not already been paid when they purchased the goods?

[kwatt]

Yes and no, if any company issues a reciept and it is VAT registered then they have to show the VAT content and they would claim the VAT back on the purchase amount then have to charge VAT on the sales amount.

It ends up that a VAT registered business takes all it’s purchase VAT away from it’s sales VAT figure and pays the difference to the treasury. So, we’re all unpaid tax collecters basically. 😉

K.

[clivejameson]

Re: vat

yes…they will have paid vat but that it is way the tax system works. As a vat registered company then any purchases they make will have vat charged on top, and any sales they make subsequently they will charge vat on the sale price.

Assuming they make a profit (which is why businesses are in business!) then the vat they pay on their purchases will be less than the vat they take on their sales.

Every three months the company has to complete a vat return form which declares all the vat incomings and outgoings, and the difference is paid to the government.

This is something the general public usually isn’t aware of…the fact that in a chain of supply the government gets its tax hand in all along the line….and you as the general public (i.e. not vat registered and therefore unable to claim any vat back) end up paying the lot!

[Martin]

Re: vat

Another example:

A manufacturer produces a WIDGET and charges his distributor £10 + VAT =£11.75 and Customs & Excise (C&E) cash in the £1.75 on the deal.

The Distributor adds on his mark-up of the Widget (say 30{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d}) and charges his Wholesaler £13.00 + VAT = £15.28 the C&E cash another £2.28.

The Distributer charges his Retailer (again with a mark-up of 30{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d}) £16.90 + VAT = £19.86 for the same Widget and C&E cash in the VAT element of £2.96.

Likely as not the retailer sticks a mark-up of say 30{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} on the Widget you wish to buy at £21.97 +VAT =£25.81 and the C&E get another £3.84.

Throughout the entire chain no-one has made any profit on the VAT element except C&E, who for doing diddley squat have acquired a total of £10.83 and all of which has been paid by you the consumer 🙁

…just as Clivejameson states..!

[johnmac11]

Re: vat

You have your figures wrong Martin, Total payable to VAT man is £3.84 because everyone down the line till the retailer claims their own vat back.

John

[clivejameson]

Re: vat

johnmac11 wrote:You have your figures wrong Martin, Total payable to VAT man is £3.84 because everyone down the line till the retailer claims their own vat back.

John

Actually, the amount is £2.09 in the example Martin gives but this of course doesn’t take into account the vat element paid by the manufacturer when he builds his widget.

The wider point i suppose is that the average member of the general public doesn’t often realise that the sales ticket on any given item includes a tax on them directly which is returned to the government of the day, but also includes a tax on profit made by companies (on top of corporation tax etc) and that those companies are unpaid tax collectors as a result (all of which takes time and money to account for).

[Martin]

Re: vat

johnmac11 wrote:You have your figures wrong Martin

Well I don’t think so, for the most part at least. 😉

Let me explain in this what after all is a hypothetical case right?

VAT is paid to the Customs & Excise all the way down the chain, and the amounts I have shown on a £10 Widget are correct with VAT @ 17.5{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d}. The only thing that may alter the amount payable to C&E is if those in the chain claim VAT expenditure against the each amount (Output Tax minus Input Tax and they pay the difference)

If they have no Input Tax to claim then in this example C&E will cop a total of £10.83 on each and every Widget sold.. 😯

[bazza500]

Re: vat

But surely if they have no input tax to claim this would mean they are not VAT registered and therefore cannot charge VAT when they sell it. Thus the VAT chain breaks at the first non VAT registered buyer and the VAT man only gets the VAT to this point.

Oh. my head hurts!

[Author]

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