If you read my recent blog, you’ll have a good understanding of what VAT is and how it affects your business. Even now, I doubt you enjoy calculating and paying your VAT return. The sensible amongst you will leave it to your accountant to sort it out, but, alas, there’s no avoiding it. Sorry about that.
And don’t forget every day you’re shelling out VAT left, right and centre. It’s charged on your travel, your lunch, your stationery and fuel etc. etc. VAT is everywhere. But do you know which products include the Exchequer’s 20% bonus and which do not?
If you look carefully, you’ll see there are many bizarre rules around VAT that are either morally dubious or downright counter-intuitive. Indeed there are some things you might not even know include VAT or why. Welcome to the topsy-turvy world of UK VAT. Let’s have a look at a few of its most outlandish aspects.
Normally biscuits, bread and cakes are seen as essentials and are therefore VAT exempt. That is until you cover a biscuit in chocolate, then it becomes confectionary on which VAT is chargeable. It seems it’s a simple rule. Adding chocolate adds VAT. Actually no. A chocolate cake is still exempt even though it’s all but the same thing.
Then there’s the thorny issue of the McVities Jaffa Cake. Is it a biscuit or a cake? The government thought the former and whacked on VAT. It took a high-profile legal tribunal to rule it to be a small cake, and the VAT duly fell off!
The humble potato. Inedible until fried to crisp perfection. Once its transformation to a potato crisp is complete, its final garnish is a 20% VAT levy. Should you want to avoid paying VAT on your salty snacks better to eat corn or maize products, like Monster Munch or Wotsits as these are VAT exempt.
And what about the distinctive Pringle you might ask. At less than 50% potato content, does it lie in a limbo state between the two? Sadly not. Despite legal efforts to avoid VAT, the High Court ruled it a potato snack and fried the makers with a 20% VAT levy.
Gas & Electricity
There’s an internal rule in VAT about essentiality. If a product is deemed essential, it’s usually VAT free. Why then do we pay 5% VAT on our domestic energy? Surely, these are prerequisites to modern life? Apparently not.
The cynical amongst you might assume that it’s an easy and lucrative source of revenue for the government; and that’s why VAT has been levered into the mix. Would a government really do that? Apparently so…
This is a weird one. Buy a book made of old fashioned paper, and it’s VAT free. Buy an e-book, and you pay the full 20% VAT. E-books according to the EU are not repositories of culture and learning. No, they are in fact digital products. This is one of those irksome little rules helping to give the EU its patchy reputation. It’s being challenged but maybe by then, at least in the UK, it might not be relevant.
It’s hard to believe that women’s’ sanitary products are classed as a non-essential luxury item and 5% VAT is applied. It’s a controversial tax and campaigners are looking to get it abolished altogether. Again, it’s EU law that states Tampons cannot move to a zero rating without the agreement of all 28 states.
It’s a shame that petty bureaucracy doesn’t recognise this is a discriminatory tax on women and allows common sense to prevail. But this is VAT we’re talking about, and the seemingly apparent laws of what’s morally right or wrong don’t always apply.
Showing You The Way
At Enso we can’t promise to take away some of these peculiarities of the VAT system, but we can help you understand how it affects your business. From there we can ensure you don’t pay a penny more in VAT than you need. Call me today on 07792686479 or email me at firstname.lastname@example.org and let me navigate you through the complex, disorienting maze that is UK VAT.