UK VAT

Value added tax, or VAT, is the tax you have to pay when you buy goods or services. The standard rate of VAT in the UK is 20%, with about half the items households spend money on subject to this rate. A value-added tax (VAT) is a consumption tax that is levied on a product repeatedly at every point of sale at which value has been added. That is, the tax is added when a raw materials producer sells a product to a factory, when the factory sells the finished product to a wholesaler, when the wholesaler sells it on to a retailer, and, finally, when the retailer sells it to the consumer who will use it. Ultimately, the retail consumer pays the VAT. The buyer in each earlier stage of the product’s production is reimbursed for the VAT by the subsequent buyer in the chain. VAT is commonly used in European countries. The U.S. does not utilize a VAT system. VAT is commonly expressed as a percentage of the total cost. For example, if a product costs $100 and there is a 20% VAT, the consumer pays $120 to the merchant. The merchant keeps $100 and remits $20 to the government.