Recent Proposed Changes to VAT
January 26, 2016
Whenever you go shopping, you can notice all products on the shelves have a certain VAT amount added to the basic price. VAT stands for Value Added Tax and it is collected by Her Majesty’s Revenue and Customs (HMRC). Merchants charge you this tax, but they aren’t allowed to spend it. At the end of each month they have to transfer it to the state, so their actual earnings are much smaller than the displayed price.
Some merchants can deduct their VAT. They calculate the total value of this tax they collect as a consequence of selling their products and services. They also calculate how much they have to pay when they purchase various things. If the collected amount is bigger than the spent one, they have to pay the difference to the state. If the collected amount is smaller, they have the right to ask the state for a reimbursement of the difference. They can also leave it only on paper and do the same calculations the following months until they break even.
Individuals, however, have to pay this tax no matter what, without any right to ask for a reimbursement. We all pay this to the states we live in, as a way of helping them offer us all facilities we benefit from as citizens of that country.
VAT has different values from country to country. This makes the whole thing even more complicated, as import and export companies have to adhere to a set of rules and regulations related to this matter. While companies have to read, understand and apply all these rules, things are quite straightforward for simple citizens: if you live in a country and you buy anything on its territory, you have to pay the VAT.
The only situation in which an individual can ask for a reimbursement is when he makes a purchase abroad. If you are from the US and you shop in Europe, you can ask to get back your VAT amount at the border, when you go back to your country. However, in order for you to qualify for this, you have to make sure you do your shopping in places that offer the tax refund facility. If you aren’t sure, you should ask for further details. Moreover, you have to inform yourself on the minimum amount you have to spend in order to qualify for a refund.
At first sight, things may seem complex and difficult to understand. In fact, all states want to have a piece of the pie whenever people create something. If you add value to the flour by turning it into bread, the government has to take its share, not from you, but from your customers. This is the price we all have to pay for living in this modern world. Since this is the only place we’ve got so far, all we can do is pay the tax and move on. This isn’t right or wrong. It’s just how things are and how they are going to stay for many years to come. If you are unsure about whether you should be charging VAT then consult a competent tax accountancy firm in your area who will be able to supply you with all the pertinent information.