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How the VAT system works

P sells raw materials to M for £50 + VAT (£10.00). Manufacturer. Producer. How the VAT system works. M reclaims VAT charged by P and sells finished goods to R for £100 + VAT (£20.00). HMRC Collects (£40.00 in total) £10.00 from P, £10.00 from M and £20.00 from R. Retailer.

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How the VAT system works

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  1. P sells raw materials to M for £50 + VAT (£10.00) Manufacturer Producer How the VAT system works M reclaims VAT charged by P and sells finished goods to R for £100 + VAT (£20.00) HMRC Collects (£40.00 in total) £10.00 from P, £10.00 from M and £20.00 from R Retailer R reclaims VAT charged by M and sells finished goods to C for £200 + VAT (£40.00) “Consumer”

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