"How do they manage that?"

It's not the rules, it's the system. I don't turnover enough on my own to register for VAT. This is fine, but I need upgrade all my equipment and software periodically in order to remain competitive. However my nearest competitiors are larger businesses who are VAT registered.

So if I spend a grand on equipment or a software upgrade then I also stump up 17.5% VAT towards the war effort. The firm down the road however can claim the lot back, effectively getting it cheaper.

Now I know this is how it is, but it stinks. A student often gets the VAT knocked off plus a little more, and I believe this is how it should be for sole traders who are below a certain turnover threshold. It may be I don't have the overheads of a larger business but I also don't have funding to keep podding out for expensive equipment.

A friend of mine got fed up with this and became VAT registered. After a couple of years he got fed up with it as he was out of pocket (being just below the turnover threshold) and decided to go back to being a non-VAT trader. Bad mistake - HM Government Tax inspectors now check every time he takes a dump to see if he's fiddling them.

Considering sole traders are always said to be the backbone of entrepreneurship in this country, it's a shame we're seen as an inexhaustible supply of tax quids for whichever pillock is in charge at the Treasury at any given time.