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Is VAT applied when a tradesman charges for materials?
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: (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.