VAT

I think you need to watch the lecture again here and think about the whole concept of VAT – a sale made for £1,000 exclusive of VAT is £1,200 inc VAT – if the customer is registered for VAT the input VAT suffered can be reclaimed reducing the net cost to £1,000 – if the customer is not VAT registered then input VAT cannot be reclaimed so the net cost is £1,200. Therefore the customer is paying 20% more if they buy from a VAT registered trader – therefore the VAT registered trader is less competitive and less likely to make sales to those customers!