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OT What is VAT?

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  • OT What is VAT?

    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

  • #2
    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.
    .

    Sir John , Earl of Bligeport & Sudspumpwater. MBE [ Motor Bike Engineer ] Nottingham England.



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    • #3
      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.
      I seldom do anything within the scope of logical reason and calculated cost/benefit, etc- I'm following my passion-

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      • #4
        "Very Atroscious Tax" Glad we revolted!
        "Let me recommend the best medicine in the
        world: a long journey, at a mild season, through a pleasant
        country, in easy stages."
        ~ James Madison

        Comment


        • #5
          No the value added is for them

          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.

          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.
          .

          Sir John , Earl of Bligeport & Sudspumpwater. MBE [ Motor Bike Engineer ] Nottingham England.



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          • #6
            Shoot with their own bullets!(Rules) The makes Victory even sweeter!
            "Let me recommend the best medicine in the
            world: a long journey, at a mild season, through a pleasant
            country, in easy stages."
            ~ James Madison

            Comment


            • #7
              Originally posted by darryl View Post
              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

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              • #8
                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.

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                • #9
                  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

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                  • #10
                    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?

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                    • #11
                      Originally posted by boaterri View Post
                      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.

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                      • #12
                        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_Zea...s_in_Australia

                        http://www.abc.net.au/worldtoday/con...2/s3573226.htm

                        http://www.google.com.au/#hl=en&suge...w=1920&bih=846

                        Comment


                        • #13
                          Oz is our penal colony.

                          Comment


                          • #14
                            Originally posted by John Stevenson View Post

                            [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.
                            Last edited by 11 Bravo; 02-28-2013, 11:55 PM.

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                            • #15
                              Originally posted by The Artful Bodger View Post
                              Oz is our penal colony.
                              And where the Navy personal to keep your ships operational come from:

                              http://www.nzherald.co.nz/nz/news/ar...ectid=10864098

                              http://jcsphotos.overblog.com/on-dec...g222-gmail.com

                              http://www.google.com.au/#hl=en&suge...w=1920&bih=846

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