Hi Bob,
> Could you explain what VAT is? ...
Yup, It's Value Added Tax.
It is like a sales tax. Consumers pay it on most everything except food
(excluding luxury food), children's clothes and books. Companies pay it on
almost everything they buy, too, and can charge it on most everything they
sell, if their turnover is over a certain level (say #50,000 p.a.) when they
have to register for VAT with HM Customs and Excise. Once registered you
can reclaim VAT you pay, but have to pass on tax collected to HM C&E.
It's called Value Added Tax because a company will buy an item for #x+VAT,
then sell it for (#x+y%)+VAT. They can reclaim VAT on the first, lower,
price, but have to pass it on to Customs and Excise when they charge it on
the second, higher price. Hence they are paying net tax on their added
value.
Hope this helps,
Paul.
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