Value Added Tax Act
The Value Added Tax (VAT) Act is a law that governs a tax system applied to the sale of goods and services. VAT is charged at each stage of production or distribution based on the value added at that stage. Businesses collect VAT from customers on behalf of the government and can deduct the VAT they pay on their purchases. This ensures that the final consumer bears the total tax burden, while businesses are merely pass-through entities. The VAT Act outlines how this tax is calculated, collected, and remitted to tax authorities, aiming for efficiency and transparency in the tax system.
Additional Insights
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The Value Added Tax Act (1994) is a UK law that establishes a system of taxation on the sale of goods and services. It requires businesses to charge VAT on their sales and pay this tax to the government. The act allows businesses to reclaim VAT paid on purchases, meaning they only pay tax on the value they add to products or services. VAT is typically included in the price for consumers. This tax helps fund public services and is an essential part of government revenue. It applies to most goods and services, with some exemptions and reduced rates.