One subject that is guaranteed to raise ire among small businesses is VAT. Essentially, the VAT system is operated by businesses acting as tax collectors for the government. As far as the consumer is concerned, it is what is called an indirect tax. It is only paid by the consumer when something is bought, but the amount of VAT cannot be claimed back by a consumer. As far as you the business person is concerned, you pay tax when you buy goods from someone else and charge the tax when you sell them on. Broadly speaking, you hand over to HM Revenue & Customs (HMRC)* the difference between the amount of tax you charge your customers and the amount of tax you have paid your suppliers.