: Is VAT applied when a tradesman charges for materials? I have been employing a plumber to do some work in my bathroom, and recently received the invoice. This consists of a charge for the labour, plus a list of materials

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The plumber will apply for and receive a refund of the amount of VAT he paid on the purchase amount. That's the cornerstone of how VAT works, as opposed to a sales tax. So for example:

Pipe cost £15 to consumer -> £18 incl £3 VAT paid to the plumber
Pipe cost £10 to plumber -> £12 incl £2 VAT paid to the supplier
Pipe cost £5 to supplier -> £6 incl £1 VAT paid to the producer
Pipe material cost £1 to producer -> £1.2 incl £0.2 VAT paid to the material company

(Rounded approximate amounts for simplicity)

Now, at each point, the amount between (original cost VAT) and (new VAT) is refunded. So by the end, a total of £3 VAT is paid on the pipe (not £6.2); and at each point the business 'adding value' at that stage pays that much. The material company adds £1 value; the producer adds £4 value; the supplier adds £5 value; the plumber adds £5 value.

Each pays some amount of VAT on that amount, typically 20% unless it's zero/reduced rated. So the pipe supplier pays £1 but gets a £0.2 refund, so truly pays £0.8. The plumber pays £3 (from your payment) but gets a £2 refund.

So at each level somebody paid a bit, and then that bit is then refunded to the next person up the ladder, with the final person in the chain paying the full amount. The £0.2 is refunded to the producer, the £1 is refunded to the supplier, the £2 is refunded to the plumber.