The Islamic View of paying VAT in the United Kingdom
Question:
Assalamualaikum wrwb, If someone owns a business in which they sell appliances. When they purchase these appliances to sell, the VAT is paid back to the business. If family come to purchase appliances from them, are they allowed to purchase at the price without VAT (cost price)?
Answer:
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
Value Added Tax (VAT) is levied on the seller of most goods and items in the United Kingdom and collected by the HM Revenue and Customs according to the Value Added Tax Act of 1994. VAT is paid over the seller to the Government after charging such tax to the customer on behalf of the Government.
Muslim citizens living in a non-Muslim majority country should abide by the rules and regulations adopted by the Government as long as they not un-Islamic. The Government has a mutual pact with the citizens of the state to provide certain public and private services such as healthcare, infrastructure and security. These services are not expected to be provided free of charge and the Government requires the mutual co-operation and contribution of its citizens to ensure a smooth and efficient operational management of the State. The issue of taxes falls squarely on the citizens of the State as this represents a joint mutual pact between the State and the citizens.
As Muslims, we should not place ourselves in an uncomfortable situation that could impact our own integrity and honour. A Muslim should protect his integrity and honour. We should be extremely cognizant of this especially when living in a majority non-Muslim country.
Therefore you should charge the VAT to your family members and pay such funds over to the Government as the indirect tax agent of the HM Revenue and Customs. In any event, you would have claimed the VAT paid to the seller from the Government in the first place and the VAT you charge to the purchaser will be a set off of the initial VAT that you claimed from the Government.
and Allah Ta'ala Knows Best
(Mufti) Ismail Desai
Chairman of Shariah Board and Fatwa Committee
Darul Iftaa, Durban, South Africa
Disclaimer The views and opinions expressed in this answer belong only to the author and do not in any way represent or reflect the views of any organizations to which he may be affiliated with. The opinions and educational information proffered in this communication are based on the jurisprudential understanding and available knowledge of the author. Given that contemporary issues and interpretations of contemporary issues are subjective in nature, another scholar may reach different juristic inferences and conclusions to those as expressed by the author. Whilst every effort has been taken to ensure total academic integrity and honesty, the author is open to corrective measures based on sound academics and juristic inferences. The Shari’ah ruling given herein is based specifically on the specific scenario in question. The author bears no responsibility towards any party that acts or does not act on this answer and is exempted from any and all forms of loss or damage. This answer may not be used as evidence in any court of law without prior written consent from the author. Any or all links provided in our emails, answers and articles are restricted to the specific material being cited. Such referencing should not be taken as an endorsement of other contents of that website.
Browse next Fataawa