I can't say this with certainty, but my assumption here is that the UK government buys products and services from the EU, for which it then reclaims the VAT in

I can't say this with certainty, but my assumption here is that the UK government buys products and services from the EU, for which it then reclaims the VAT in the same way a business would. Petroleum revenue tax just sent me down a bit of a rabbit hole - according to https://www.gov.uk/guidance/oil-gas-and-mining-petroleum-revenue-tax https://www.gov.uk/guidance/oil-gas-and-mining-petroleum-rev... PRT is effectively zero rated for any field approved after March 1993, but because of government vagaries still exists as a concept. Given that I could entirely believe that it costs the government more to adminster the tax than they make in revenue from it.