You buy it for 10 plus vat so 11.75 (in essence 11.75 comes out of your account). You sell for 100 plus VAT so 117.50 is paid in. Each quarter you claim the VAT back on what YOU paid for the item (ie - 1.75) but you have to pay the VAT man 17.50 what the customer has paid. All depends on the business as to whether its advantageous.