VAT criticisms?

Michael,

You seem to have a fundamental misunderstanding of how the VAT system works. If you re-read the post by Michael Gilligan at 21:30:02 he has very succinctly outlined its aim to be a tax on goods and services produced to be paid by the end consumer of those goods and services. The VAT that you pay a supplier doesn't go to line his pockets, he collects it from you and then passes it on to HMRC who then give the money to the government who provide you with services such as healthcare, education, security through the armed forces and a very considerable social welfare budget to help the poorer people in our society & so much more besides.

Nobody likes paying taxes but most people agree that they are a necessary means to support our society in general. The arguments start when trying to decide how to divvy the proceeds up but I guess thats what we pay our politicians to sort out for us!

Regards Martin.

Hi Martin,

I may well have a stunted understanding of VAT but I notice you didn't care to suggest how the evidence I provide for it becoming a tax burden on poorer people is invalid. There isn't even an attempt to address it, yet alone invalidate it. You can see I've stressed many times that I fundimentally am for the idea of a tax. I am only tempted to clam up because I simply become a victim of disinformation or character assassination because I dared to speak up. I think this ought to be closed now.

You wont get another peep out of me on this matter. I would rather that than start collecting a club of silenced posters, in effect they have silenced me, but maybe they can find common ground with each other in their own posts without me to derise, clearly they'll have a whale of a time.

Michael W

Edited By Michael Walters on 14/12/2016 23:31:43

"disinformation or character assassination" I really fail to see how we get to this statement from my initial comments?

Mark

.

Actually sat in my new week old Staples office chair [ VAT deductible ] doing end of year accounts.

3 nights this week and a couple next week. Then a blitz after boxing day to get the decks clear for doing the VAT at the end of December although it doesn't have to be paid until end of January which also coincides with the first payment for 2015 /2016 income tax, followed by the second payment in July.

I think I'm lucky in that as a sole trader I don't have to pay corporation tax as well.

All unpaid.

I hope you are wearing a shirt of sack cloth to sit in that new chair.

I started out as a sole trader but very quickly found out that most clients dislike this arrangement (they expect consultants to be Ltd for some reason).

I don't think there is that much in it regarding TAX advantage between the two models (sole trader or ltd.) for small companies, you get to paying your tax whatever way you go. You are correct about the admin work required as there are more formalities to be dealt with for a ltd company and as you mention, it all has to be done on time so you get the pleasure of putting several hours in as unpaid overtime!

Mark

Consider this whilst working out your tax returns...

...good to see it's being spent wisely.

Interestingly, even The Telegraph seems to be begging now.

Edited By blowlamp on 15/12/2016 00:10:52

Michael,

I wasn't intending to challenge your quoted figures as I have no idea as to their validity. You seemed to be suggesting that VAT registered companies were using VAT as a means to boost their bank balances at the expense of the consumer which in my opinion is not the case for the reasons I outlined, hence my reply. I was also trying to point out that most of us benefit in many ways from the services that are provided by the taxes we pay so its not all just a one way drain on our pockets.

I'm very sorry if my post offended you, that was not my intention. I will just finally say this though; if you don't want people to argue with you on this forum you shouldn't post your opinions about controversial subjects.

Regards Martin.

.

They are welcome to it Martin.

When the ROF was going at Nottingham I used to make the triggers for the Heckler a Kosh machine pistol.

Absolutely 1,000's upon 1,000's or the damn things. I was glad when the ROF closed down and they took the line back to Germany. That was one job I never missed.

PS hows the threading going on with Planet CNC ?

I think one needs to correct that misconception

One is allowed to claim expenses in connection with operating the business.

Which is different to expenses for personal use which I believe that you are implying in your general text

Edited By Sam Longley 1 on 15/12/2016 06:00:56

A year or so ago I bought some L297 chips from China, like these:

JsAAOSwknJX0Sjt

Not that seller IIRC but some £3 for 10, P&P Incl.

Duly arrived, Postie demanded some £11 ( I think ) to release ... told him contents were worth £3 and said to take them away and dump them. About 10 days later they were shoved through the letterbox.

As these things are currently some £9 a pop from Farnell I didn't have much confidence but worth a punt for 30p.

And they do seem to work fine.

I have had other cheapo stuff from China delivered OK. No idea why that delivery went wrong ??

D.

Edited By Dave Daniels on 15/12/2016 07:23:41

When i first started flying and crashing r/c helis I used to buy my spares direct from china. The postal service was innundated with folk doing similar things... used to get my parcels usually within 3 days and no taxes. Then they created a new customs sorting office in Birmingham? and everything went through there - delays and taxes. There is a (legitimate) handling fee and vat on the goods and postage and that fee. Couriered stuff they wanted £13 handling and they moved to assessing value here irrespetive of the declared value since the chinese marked everything as low value toys to try and keep their market going.

When you think about it there is an international postal agreement that the service in the country of origin gets the postage fee and the delivering country just delivers with no revenue. You can imagine how much stuff royal mail is carting around for nowt. The chinese fee for postage is peanuts compared to the UK charges to send stuff there - which makes it a one-way market. I could buy stuff for £4 or £5 delivered but if I wanted to return the item then the fee might well be £30 UK post.

As to vat - the original concept was that it would pay for europe... but like all taxes gets used for whatever Gov wants.. and as an unwieldy tax it creates jobs. It used to take me 2 solid days every quarter to work through my vat return for the privilege of paying £30K to the coffers. HM C&E refused to allow me to charge them for my time... I did argue that when they sent someone to check my books that guy didn't work for free... so why should I?

Gov wants power. Power to them means control of more people, more international posturing and vanity projects to crow about. All that means they need to control the mass and keep it 'happy' unnecessary jobs and make-work are one way. Fr;instance there's absolutely no reason why fuel duty couldn't be calculated to include vehicle tax and insurances and MOT's - no-one could avoid it and road congestion would drop but the motor insurance industry would collapse as would most of swansea with unemployment. It's why we have an economy dependant on folk buying overpriced coffee in cardboard cups

> As to vat - the original concept was that it would pay for europe... but like all taxes gets used for whatever Gov wants

So many misconceptions. If that was the case, they would have added it on top of purchase tax, not replaced purchase tax.with it.

N.

I think, I say I think and may be wrong, VAT distorts the market when you start buying/selling between registered and non-registered traders.

Let us imagine a model engineer is selling a loco to a VAT registered trader e.g. the wellknown guys in Lincolnshire.

Most loco owners are not VAT registered I suggest.

Let's imagine the traders could expect to sell the loco for about £6k including VAT.

1/6 of the selling price is VAT = £1k

Presume the trader has to make a profit, pay staff and take into account the risk - perhaps £1,500 would be a suitable amount.

All this means the maximum the modeller can sell his loco to the trader for is £3,500.

Thus, I think he would be better off selling to a non-registered trader who could, I say could, afford to give him more and make the same profit - and regstered traders might go out of business.

There may be errors in my thinking - grateful to be corrected.

Edited By Clive India on 15/12/2016 09:42:06

Michael,

As has been said by someone else, if you start a discussion on a controversial subject, you must not complain if it starts a heated discussion.

I looked up your link, and to be honest what it says is whether VAT is regressive or progressive depends on exactly how the tax is implemented:

The "value-added tax" has been criticized as the burden of it falls on personal end-consumers of products. Some critics consider it to be a regressive tax, meaning that the poor pay more, as a percentage of their income, than the rich. Defenders argue that relating taxation levels to income is an arbitrary standard, and that the value-added tax is in fact a proportional tax in that people with higher income pay more in that they consume more. The effective progressiveness or regressiveness of a VAT system can also be affected when different classes of goods are taxed at different rates. To maintain the progressive nature of total taxes on individuals, countries implementing VAT have reduced income tax on lower income-earners as well as instituted direct transfer payments to lower-income groups, resulting in lower tax burdens on the poor.

The only reference given for the paragraph above is a document on the implementation of the Singapore General Sales Tax which explains it was designed to be progressive as there was fear from the outset that it would be criticised as a regressive tax.

Further down that section it states that research shows that moving to VAT from a purchase tax generally has the effect of reducing prices, which goes against what some other posters have claimed.

Neil

No. The trader only has to charge VAT on the difference between his buying and selling price the VAT Margin Scheme.

Russell.

I'm confused.
If I bought a second hand lathe for £5k + VAT I would expect to pay £6k with a VAT rate of 20%

If it's on the margin I could not work it out as I do not know what the seller bought it for.

This is a scheme you can choose to be on if you mainly deal in used goods.

N.

As I understand it the original purchase tax was a tax on 'luxury' items and a form of import duty (as in making import type goods more expensive to the end user on top of the acual import tariff (so Gov could argue they weren't blocking those imports). White goods were the big thing but it also destroyed UK manufacture/salesof them. Membership of the EU and it's intent to control the flow of goods and it's own (absurd) costs meant a need to increase eu revenues, It was public antagonism that ended up with VAT being zero rated on food. kids clothes, books and health care. I believe they are 'vatted' in many euro countries. There's also a rule about not being able to de-vat classes of items once vatted and a minimum rate to which it can be reduced once it's greater-than? It's also part of the group of stealth taxes... give folk the belief they keep more of their earnings.

Despite the so-called harmonisation of europe there's a lot of 'cons' about. I know that in my past trade one could find the costs of some items cheaper in other euro countries than here.- even countries with higher vat rates - because the manufacturer sold them cheaper there than here (as in for as much as the market will bear, nowt to do with costs of manufacture). But one could't legally import and resell because the labeling was in Danish or Romanian or whatever

Just had a quick read of the VAT margin scheme, and it only appears to apply to a few select cases, second hand items being one of them.

I believe the case being made by Clive implies a new item being resold as new by the vendor, in which case the second hand argument does not hold true and the VAT margin scheme cannot be used - otherwise every purchase of items used for resale could be argued to be second hand and therefore subject to the margin VAT of 16.67%.

I had a similar issue a few years back where I was looking to re-sell items made by a colleague of mine. I was VAT registered, he was not, I could not make any profit on selling the item for the same price as him, even with the low price that he was selling items in bulk at to me, purely because I had to add VAT to all items that I sold, whereas he did not.

A couple of years ago I worked out that for £2.00 of gross salary spent on petrol, £1.80 goes to the government as Income Tax, NI, VAT, duty, etc, £0.20 was the actual cost of the petrol (varied slightly dependant on the individual's tax band) - I am sure things have become much worse since then.

Even worse when you look at one's own gross earnings. Charge yourself out at an hourly rate, pay the vat and your running costs off that to get to keep 20% net profit on which one paid higher rate tax (if earning enough) of 40% and then vat on stuff one bought and one was down to roughly having the real purchasing power of 10% of one's gross - which us why one ended up having to charge my customers silly money for what i actually did and employing loads of staff to get a small bit of their gross for myself.