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boaterri
02-28-2013, 07:13 PM
This is directed mainly towards the UK contingent. I know that "VAT" stands for Value Added Tax, but how is it applied? How is it calculated? What items are usually subject to VAT?

Thanks,

Rick

John Stevenson
02-28-2013, 07:27 PM
Usually applies to everything except food, books and children's clothes.
Current rate is 20%

If you are a business and it's a business expense you can claim it all back.

Say you as a member of Joe Public buy say a washing machine for £240 you pay £240 of which £200 is the washing machine and £40 is tax which the manufacturer then has to pay to the authorities and it's a one way payment.

If I, being VAT registered, buy a new lathe for £1100 the company selling it pays £100 in VAT but I can claim that £100 back at the end of a tax quarter.

Only way a business can make anything off the system is with Exports to none EU members.

I buy materials in for say £1100 and put a machine together for say £2500 I can claim £100 back in VAT but do not have to charge VAT on the £2500 so basically make another £100 profit on the deal.

darryl
02-28-2013, 07:29 PM
Usually with a brush, but sometimes sprayed :)

Hmm- nothing changes in the product, so where is the value added? It seems the value is subtracted- from your pocket.

flylo
02-28-2013, 07:45 PM
"Very Atroscious Tax" Glad we revolted!:p

John Stevenson
02-28-2013, 07:46 PM
No the value added is for them :mad:

Point is they make the rules, it's how you interpret them that makes it worth while !

Every so often I claim for coffee, sugar, washing power [ have to wash work clothes ] dog food [ it's a guard dog ] all the diesel [ that's why I run Donald, all van expenses are allowable, cars can only claim a percentage as they assume you are doing private mileage ]
All the energy bills for the workshop and 30% of the houses bills as the office is in the house.
Vet bills, all clothes that can be construed as working clothes which in my case is 99% of them. :rolleyes:

Even tried claiming for a new TV as it was needed to keep abreast of the current political situation. That got thrown out !!

They know you are trying it on but as I say it's their rules and you have to give as good as you get.

[EDIT] Eric, you have sales tax though don't you ?
Also I believe you have an annual tax in some states where you have to pay a % of the value of your assets ?

Don't want to start a war as we can't change anything anyway but over all it's probably swings and roundabouts.

flylo
02-28-2013, 07:50 PM
Shoot with their own bullets!(Rules) The makes Victory even sweeter!

Georgineer
02-28-2013, 08:09 PM
Usually with a brush, but sometimes sprayed :)

Hmm- nothing changes in the product, so where is the value added? It seems the value is subtracted- from your pocket.

Ah, they've got you there as well - VAT is payable on services as well as goods.

George

firbikrhd1
02-28-2013, 09:27 PM
Does the government keep track of private sales and charge VAT on them as well? If not, it sounds to me like the VAT should drive up the price of used items.

boaterri
02-28-2013, 09:32 PM
Ok, so it is a sales tax built in to the price of the item purchased and not added on at the register. Right?

I think it was the "Value Added" part that had me confused.

Rick

The Artful Bodger
02-28-2013, 09:42 PM
VAT is a consumption tax while income tax is a tax on income. There are advantages in both systems but consumption tax generally favours the less rich in society.

New Zealand has a Goods and Services Tax, which is also a consumption tax and may, or may not, be better than the UK's VAT.

In the NZ scheme there are few if any exemptions which makes implementation and enforcement simple. The rate here is 15%. So, if you are in business take 15% of your business expenditure and subtract it from 15% of your income, and the difference is what you owe the tax man. There is no GST collected on private sales nor on sales of used stuff.

I prefer consumption taxes but they do vary from country to country and the more complex the rules the less satisfactory they are for all concerned. Maybe Tiffie can tell us about Australia's consumption tax rules on food stuffs?

The Artful Bodger
02-28-2013, 09:47 PM
Ok, so it is a sales tax built in to the price of the item purchased and not added on at the register. Right?

I think it was the "Value Added" part that had me confused.

Rick

If Sir John buys a billet of fantasium for 100 quid and machines it to become a custom part for someone and for which he charges 300 quid the value added by him is 200 quid and it is the 20% of that which he will pay the tax man.

oldtiffie
02-28-2013, 10:22 PM
I will stay right here in Australia (aka OZ) where the VAT equivelent and known as "Goods and Services Tax" (GST) is 10% and is probably closer to the New Zealand GST (15%).

The NZ GST might be part of the one-way annual migration flow from NZ to Austalia.

http://en.wikipedia.org/wiki/New_Zealanders_in_Australia

http://www.abc.net.au/worldtoday/content/2012/s3573226.htm

http://www.google.com.au/#hl=en&sugexp=les%3B&gs_rn=5&gs_ri=psy-ab&cp=31&gs_id=3e&xhr=t&q=new+zealand+migration+to+australia&es_nrs=true&pf=p&rlz=1R2IRFC_enAU360&sclient=psy-ab&oq=new+zealand+migration+to+austra&gs_l=&pbx=1&bav=on.2,or.r_gc.r_pw.r_qf.&bvm=bv.43148975,d.dGY&fp=561aa263b178e29d&biw=1920&bih=846

The Artful Bodger
02-28-2013, 10:51 PM
Oz is our penal colony.

11 Bravo
02-28-2013, 10:52 PM
[EDIT] Eric, you have sales tax though don't you ?
Also I believe you have an annual tax in some states where you have to pay a % of the value of your assets ?

Don't want to start a war as we can't change anything anyway but over all it's probably swings and roundabouts.

John,

You are right that we can't change anything (in this discussion anyway), and I hope no war starts. I find it interesting to read how people explain the systems in other countries, direct from the people dealing with it, rather than what the news decides to report about it.

Not all states here have sales tax, there are 5 states that do not charge it.

Not all states have income tax here, there are 7 that do not charge it.

Interestingly, Alaska is the only state that has neither sales nor income tax. The state makes enough money on royalties from natural resource extraction that every resident of the state gets a check from the state government every year.

Our tax system is really a mess. The federal government applies an income tax on both individuals and corporations. It is progressive and very complicated. In rough numbers only about half the working population pays it. The federal system also has several minor taxes, that again, are complicated and not worth trying to explain unless you are really interested. Essentially, there is no federal sales tax. There is a federal tax on gasoline, diesel, and various other fuels, but again it turns quickly into a can of worms trying to keep it straight. Every state also has a state tax on fuel, and the amount differs from state to state. Federal and state tax is added into the price displayed on the pump.

States are a different animal. 41 of the states have both income and sales taxes. On top of the state sales tax, almost all the county and city local governments have a few percent sales tax added to the total. I know of a few examples of local income taxes in addition to the state tax, but local income taxes are not very common.

There really isn't identified taxes on assets, or wealth, although there are some political figures talking about the idea. There are however a from of taxes on assets in the form of property taxes. These being a tax on the value assessed on any property you own. There is also taxes on annual vehicle registrations which are biased on the value of the vehicle, but most people wouldn't consider these a wealth tax.

Many more minor taxes and fees. Too many to list really. Compiling with the tax laws here can be quite difficult. Most Americans find the VAT tax concept bizarre and difficult to understand, but seem OK with the tax laws we have. I think it is all what a person is familiar with. We have political figures here also talking about adding a VAT. Of course it would be added on top of the tax code we have now, and I think that would not be a good idea.

I am a believer in a consumption based tax system. As Artful Bodger pointed out, they work better when kept very simple.

oldtiffie
02-28-2013, 11:12 PM
Oz is our penal colony.

And where the Navy personal to keep your ships operational come from:

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10864098

http://jcsphotos.overblog.com/on-deck-regards-peter-hogg-royal-nz-naval-assoc-south-canterbury-n.z.-peterhogg222-gmail.com

http://www.google.com.au/#hl=en&sugexp=les%3B&gs_rn=5&gs_ri=psy-ab&cp=49&gs_id=5q&xhr=t&q=australian+navy+sailors+manning+new+zealand+ship s&es_nrs=true&pf=p&rlz=1R2IRFC_enAU360&sclient=psy-ab&oq=australian+navy+sailors+manning+new+zealand+shi ps&gs_l=&pbx=1&bav=on.2,or.r_gc.r_pw.r_qf.&bvm=bv.43148975,d.dGY&fp=561aa263b178e29d&biw=1920&bih=846

flylo
02-28-2013, 11:14 PM
I also believe a comsuption tax is the best thing that can happen as it encouages prople to save money & a tax is paid on everything bought which taxes "illegal" money. It would also elemenate many IRS jobs, loopholes & tons of paperwork. The VAT just looks like such a large percentage but if it's your only tax it's well in line. We have 6% sales tax, income tax, property tax, fuel tax, booze tax, etc. When our Federal income tax was first started & was 1%. One official said then "if we start this who knows it may go to 5%". Sorry I can't quote who it was.

The Artful Bodger
02-28-2013, 11:19 PM
And where the Navy personal to keep your ships operational come from:



An excellent deal it is too Tiffie


The Australian sailors serving with the NZ navy are paid by Australia at Australian rates and with Australian conditions of service.

Allan Waterfall
03-01-2013, 02:56 AM
And the really clever thing to screw money out of the working man is the way fuel is priced.

Fuel has a duty added too it and then that total has 20% VAT added to it.

Allan

The Artful Bodger
03-01-2013, 03:18 AM
And the really clever thing to screw money out of the working man is the way fuel is priced.

Fuel has a duty added too it and then that total has 20% VAT added to it.

Allan

That's right, that's the way it works on everything on which duty is paid. VAT is a consumption tax and is levied at the point it passes to the end user.

Timleech
03-01-2013, 03:34 AM
As with any tax there are oddities.
I do some work for two small companies operating freight barges around the Mersey area. Commercial vessels above a certain size are exempt from paying VAT. If I work on a barge, there is no VAT on my time. If I supply parts and fit them, there is no VAT. If I supply the parts but don't fit them on board, there is VAT. If I do some work on their shore-based kit (crane, pump etc), there is VAT. Long-term, it makes no difference to them because they can claim back the VAT at the end of the quarter, but they have to shell it out to begin with. Luckily their guy who signs the cheques is a retired VAT inspector, so he quickly puts me right if I get it wrong!

Tim

Edit to add - there's a turnover threshold below which small businesses don't need to register for and charge VAT. I had several years watching the figures to make sure I kept below, but found it easier in the end to get registered. Since then they have increased the threshold so that a lot of one-man bands don't have to get involved, and I've slowed my workload as I've got older so I could probably deregister, but the penalties for overstepping the mark are quite severe. Being VAT registered means a bit more discipline is needed with the paperwork, it has to be pretty much in order four times a year instead of only once for the Income Tax. I might curse it but that's a good thing for disorganised people like me.

The Artful Bodger
03-01-2013, 03:42 AM
It all quickly turns to custard when exemptions and differing rates are introduced.

EVguru
03-01-2013, 04:13 AM
Ok, so it is a sales tax built in to the price of the item purchased and not added on at the register. Right?

Yes, you pay the price you see on the sticker in a retail outlet.

UK visitors to the US often find it bizarre that you have to perform a calculation to work out how much something costs in a shop!

Somewhere like a Plumbers Merchant might well display prices less VAT because many of their customers would be VAT registered an not liable. Many online sellers have an option to display prices with or without, or simply display both.

The Artful Bodger
03-01-2013, 04:41 AM
Same here, you pay the price on the sticker unless clearly marked as excluding GST.

MrFluffy
03-01-2013, 05:01 AM
The gov even have a nice webpage for it. Production of which was probably funded by vat...
https://www.gov.uk/vat/overview

Georgineer
03-01-2013, 05:17 AM
It all quickly turns to custard when exemptions and differing rates are introduced.

I don't know what the VAT position is on custard, but the tax authorities go through huge complications and very expensive court cases to establish what can be taxed. In principle, VAT is very simple; in practice it is endlessly complicated:

http://www.bottomlineonline.co.uk/why-is-vat-payable-on-chocolate-covered-biscuits-but-not-on-chocolate-covered-cake/

George

zimma
03-01-2013, 07:12 AM
Value Added Tax is a 20% tax on the "Added value" that companies give to products as they pass up through the manufacturing chain.

An example,

Company 1 has some raw materials.
Company 1 assembles these materials into a widget
Company 1 sells these widgets for £100+vat
Company 1 have added £100 of value (simplified for illustrative purposes, i know the raw materials are not worthless and they had to spend some money to get them)
Company 1 have collected 20% of the value of the product from the buyer (vat) and given that to the government. (£20 paid to government)
Company 1's overall VAT payment to the government is effectively 20% of the value they added. i.e £20

Company 2 buys these widgets for £100+vat and reclaims the VAT they paid from the government (£20 reclaimed from government)
Company 2 modifies these widgets
Company 2 sells these modified widgets for £200+vat
Company 2 have added £100 of value
Company 2 have collected 20% of the value of the product from the buyer (vat) and given that to the government. (£40 paid to government)
Company 2's overall VAT payment to the government is effectively 20% of the value they added. i.e £20

Company 3 buys these widgets for £200+vat and reclaims the VAT they paid from the government (£40 reclaimed from government)
Company 3 modifies these widgets
Company 3 sells these modified widgets for £400+vat
Company 3 have added £200 of value
Company 3 have collected 20% of the value of the product from the buyer (vat) and given that to the government. (£80 paid to government)
Company 3's overall VAT payment to the government is effectively 20% of the value they added. i.e £40

The end user buys these modified widgets and pays £400+vat. (£80 vat paid)

So, overall, the end user Paid £80 in VAT. It was all given to the government in the end, but by several different companies down the manufacturing tree, in ratios proportional to the value that they added due to their manufacturing segment.

This is quite a simplified example, but may help you to get your head round how it works.

Graham

zimma
03-01-2013, 07:18 AM
Somewhere like a Plumbers Merchant might well display prices less VAT because many of their customers would be VAT registered an not liable. Many online sellers have an option to display prices with or without, or simply display both.

Everyone pays the VAT, including businesses, at the point of sale. Products targeted to businesses will quite often be listed without VAT included in the price as this is the ultimate price that the business pays once it has reclaimed the VAT back from the government, but when your plumber gets his wallet out at the counter he will have to add 20% to the non VAT price.

20% VAT is nice and easy to work out as thats 10% times two. Very quick and easy to do in your head. Its not so easy when it was 17.5%, as that was 10%, plus half of 10%, plus half of that......

willmac
03-01-2013, 07:21 AM
Just a pointer for US people who visit the UK or any part of the EU for that matter. If you buy things in UK, you will normally be charged VAT, but you can claim the tax back when you go back home. There is usually an office at the airport where you can have your purchases examined, then get some forms stamped which you then use to claim back the tax from the place where you bought the goods. I won't try to explain the details because it is deliberately complex and obscure. The VAT people don't make it easy, but with persistence you will succeed. I think that Douglas Adams had this in mind when he wrote:

“But the plans were on display …”
“On display? I eventually had to go down to the cellar to find them.”
“That’s the display department.”
“With a flashlight.”
“Ah, well, the lights had probably gone.”
“So had the stairs.”
“But look, you found the notice, didn’t you?”
“Yes,” said Arthur, “yes I did. It was on display in the bottom of a locked filing cabinet stuck in a disused lavatory with a sign on the door saying ‘Beware of the Leopard.”
― Douglas Adams, The Hitchhiker's Guide to the Galaxy

zimma
03-01-2013, 07:26 AM
Just a pointer for US people who visit the UK or any part of the EU for that matter. If you buy things in UK, you will normally be charged VAT, but you can claim the tax back when you go back home. There is usually an office at the airport where you can have your purchases examined, then get some forms stamped which you then use to claim back the tax from the place where you bought the goods.

I often wonder if the tax office at the airport send advanced notification to the destination airport customs department for passengers that have reclaimed the VAT on a large amount of goods. Presumably some sort of import tax and duty would be due on these if it was above your tax free allowance!

willmac
03-01-2013, 07:34 AM
VAT can get very messy indeed, with long legal battles over classifications of products. A famous example is Jaffa cakes. These have three layers, sponge, jelly and chocolate. The VAT people said that it looks like a chocolate biscuit (on which VAT must be paid). The makers said no - it is a cake and always has been (No VAT on cakes). It might be small and shaped like a biscuit but it has sponge so we say cake. This went to court, then higher courts etc. The judges eventually decided that it was a cake, based on a lot of factors including what it tasted like when it went stale and the fact that children like them (very true!). There were many millions in back taxes hanging on this decision. I suspect a lot of cakes were consumed by experts and judges before they finally decided.

zimma
03-01-2013, 07:50 AM
Lets not even mention Pastygate!

For others that don't know about this one.

Hot takeaway food is taxed at 20%
Cold takeaway food is taxed at 0%
But a pasty that wasn't going to be kept hot and sold as such, but removed from the oven and immediately sold to a customer before it has had chance to cool down is 0% as that is classed as cold takeaway food even though it is hot

Wikipedia Pasty Tax (http://en.wikipedia.org/wiki/Pasty_tax)

EVguru
03-01-2013, 08:18 AM
Of course, if you're paying a builder, he'll ask for cash and VAT stands for;

Vague Additions to Total

Q. 'What's this item?'

A. 'That's the labor for adding up the bill'

The Artful Bodger
03-01-2013, 01:58 PM
Like I said, exemptions and differing rates of consumption taxes are madness, they make it harder for the people along the line to calculate and keep records, they give opportunity for evasion and with that comes increased costs for enforcement. It is no doubt possible to complicate a taxation system to such a point that the net contribution to the government coffers is nil or even negative.

In the NZ system, there is one rate and no exemptions that I know of but there may be some that I don't know of.

My personal income tax rate was near 50% but when consumption taxes were introduced that began to fall and is now about 20%.

oldtiffie
03-01-2013, 06:02 PM
Just a pointer for US people who visit the UK or any part of the EU for that matter. If you buy things in UK, you will normally be charged VAT, but you can claim the tax back when you go back home. There is usually an office at the airport where you can have your purchases examined, then get some forms stamped which you then use to claim back the tax from the place where you bought the goods. I won't try to explain the details because it is deliberately complex and obscure. The VAT people don't make it easy, but with persistence you will succeed.

Bill, I am in Australia (not in the EU) but I've bought a few itemson and off over time from the UK. The vendors quoted and removed the VAT in each case as I was not in the UK/EU.

This was all very nice and dandy unless or until the purchase price plus postage and handling/delivery cost was $1,000 Australian or more in which case the Australian GST (10%) was applied to the total cost. It is/might be possible to break it down to parcels or less than $1,000 AU - but you take a risk with Australian Customs (who are not silly).

oldtiffie
03-02-2013, 05:19 AM
This was a postof mine:


I will stay right here in Australia (aka OZ) where the VAT equivelent and known as "Goods and Services Tax" (GST) is 10% and is probably closer to the New Zealand GST (15%).

The NZ GST might be part of the one-way annual migration flow from NZ to Austalia.

http://en.wikipedia.org/wiki/New_Zealanders_in_Australia

http://www.abc.net.au/worldtoday/content/2012/s3573226.htm

http://www.google.com.au/#hl=en&sugexp=les%3B&gs_rn=5&gs_ri=psy-ab&cp=31&gs_id=3e&xhr=t&q=new+zealand+migration+to+australia&es_nrs=true&pf=p&rlz=1R2IRFC_enAU360&sclient=psy-ab&oq=new+zealand+migration+to+austra&gs_l=&pbx=1&bav=on.2,or.r_gc.r_pw.r_qf.&bvm=bv.43148975,d.dGY&fp=561aa263b178e29d&biw=1920&bih=846

And this was the Artful Dodger's response to it.


Oz is our penal colony.

This sort of thing rang a bell with me in Australia and reading a local paper yesterday sort of confirmed it:

http://www.heraldsun.com.au/news/law-order/evil-new-zealand-gang-comes-to-melbourne-and-bikies-wont-like-it/story-fnat7jnn-1226588768305

which pretty well confirmed that we may be a penal colony for New Zealand.

But we may have to re-visit our past as Australia was founded and settled as a British/English penal colony where things were not pretty.

We have deported quite a few of these unsavoury types back to NZ - but the tide of new arrivals - good and bad - seems over-whelming.

John Stevenson
03-02-2013, 08:12 AM
We have deported quite a few of these unsavoury types back to NZ - but the tide of new arrivals - good and bad - seems over-whelming.

Have you tried binning them ??