Reply to post: Re: You don't have to pay VAT for business expenses?

Re: You don't have to pay VAT for business expenses?

>If I buy a new printer for my home office to use in my business, there's no exemption. I have to pay sales tax on it.

Same with VAT, the sum of money that gets handed over is the same. However, the fun and games start with how that purchase is accounted for.

For non-VAT registered businesses and those in the flat rate scheme, the only thing that can be done with that receipt is to treat it like a normal expense and thus offset the entire receipt against their normal tax. However, a business that does full itemised VAT has a choice, they can take the VAT/sales tax element (itemised on the receipt) and deduct it from any VAT they have collected from their sales - paying the reduced amount of VAT to HMRC, alternatively they can simply expense the VAT element along with the other costs on the receipts against their normal taxes.

It is a little surprising that the UK VAT rate has remained at 20% and not been returned to 17.5% or even 15%, because as you say higher tax rates make it more remunerative to find ways to avoid paying the tax. But as I noted previously, VAT accounts for about a third of the tax revenues HMRC receives and any significant reduction in the amount collected could hit government expenditure hard.