You may or may not know that this Saturday, 1st April 2023, is VAT’s 50th birthday.
To celebrate this momentous occasion, and before we all head to the Jaffa Cakes to celebrate, I thought I’d share a few quirky VAT facts you might not have realised.
VAT is a simple tax. My English translation of the EU VAT directive, on which the UK legislation is based, runs to just 116 pages but my current UK legislation reference book has 3,752 pages!
- Introduced into the UK in 1973, as a requirement of joining the EU. In Europe VAT was initially introduced in France 1954. Although the concept was originally thought up by a German businessman Wilhelm von Siemens in the 1920s. The earliest paper in English I can find was called “The value-added tax, its theory and practice” was published in 1967 and was written by a F.C. Stanton!
- In 50 years there have been 5 standard rates in the UK – 8/10/15/17.5/20%.
- The 0%, Exempt or OTS supplies all are VAT free but have vastly different VAT consequences.
And now a few quirks, courtesy of the VAT Tribunal and HMRC rulings…
Food
- Food that is too hot to eat immediately can technically be zero rated as cold food for VAT purposes.
- Orange juice zero rated, lemon juice is zero rated but mixed up and they become a standard rated product. Same applies to fruit. Take three different zero-rated fruits, blend them, the result is a standard rated product.
- Nesquik: the fruit flavoured versions are standard rated, but the chocolate version is VAT free.
- Rice cakes are zero rated if they are sweet that standard rated if they are savoury.
- Marshmallows smaller than 1.5 inches in size are zero rated as food ingredients above this measurement are standard rated.
- Aphrodisiacs can be food and therefore VAT free. Tribunal has ruled that capsules, drops, powders and sprays that stimulate libido are intended to be human consumption. Additionally, a bar of chocolate is standard rated but chocolate body paint is zero rated.
Animals
Food for greyhounds is standard rated but specialist food for racing greyhounds is zero rated. Then just to confuse further. Petfood specifically for Poodles is standards rated and food specifically for Labradors is zero rated.
- Rabbits are zero rated even if they are sold as pets. The sale all other pets is standard rated.
- The supply of bumblebees is subject to VAT, but the supply of honeybees is not.
- Food for wild birds is zero rated, while food for caged birds is standard rated.
- The sale of kangaroos is standard rated but kangaroo steaks are zero rated.
- Horses: The sale of a live horse is standard rated, but the sale of a dead horse is zero rated.. But the VAT status of the supply of a horse to a stud farm depends the sex. A stallion is supply of goods. A mare is the supply of “work carried out on goods” and therefore a service.
Miscellaneous
- If a client is burgled, it is best to let the robbers take stock rather than cash. Goods lost to theft are not subject to VAT but if cash is taken from the till VAT will still need to be accounted for.
- The sale of counterfeit goods are subject to the standard rate, but the sale of counterfeit banknotes is not.
- Burying a deceased person is VAT exempt but exhumation can be standard rated.
- Children’s clothing is generally zero rated but any clothing made from the skins of either a Yemenis, Mongolian or Tibetan goat is standard rated.
- Printed forms VAT liability is determined by whether the paper is stiff of floppy. Technically, it to do with the weight of the paper but that isn’t what the Tribunal said.
- Adult colouring books zero rated unless the pictures contain words, nudity, or scenes of theft, in which case they are standard rated.
Finally, some news hot off the press… HMRC are looking to block a loophole in the film industry and need to speak to any relatives of the Star Wars characters, especially Darth Vader’s brother Taxi.
