The Mudcat Café TM
Thread #161908   Message #3851431
Posted By: Nigel Parsons
20-Apr-17 - 10:43 AM
Thread Name: BS: UK General Election
Subject: RE: BS: UK General Election
This may need a little simplification.
VAT is 'Value Added Tax'. Each business in the chain accounts for tax on the value they have added to the transaction.
This is done by reclaiming the VAT they have been charged by their suppliers (from HMRC), and paying the VAT that they charge to their customers (to HMRC).
Where the supply they eventually make is zero-rated (basic foodstuffs, children's clothes, books etc.) they have no VAT to pay across to HMRC, but this does not prevent them reclaiming the VAT they have been charged by their suppliers. As such, there is no VAT included in the sale, even in the costs of making that sale.