Solution 7.1

Operation of VAT

Value added tax (vat) is a tax on consumer spending. Businesses (whether sole traders, partnerships or companies) charge VAT on the supply of goods and services and they act as a collector of these monies for the Revenue Commissioners. 

VAT is not a business expense

In most cases VAT is not considered a business expense because VAT on expenses can be offset against VAT on charged on sales(inputs)