Monthly Archives: June 2014

Some Odd VAT Facts

By   23 June 2014
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We all know that the VAT rules throw up some oddities which are mainly the result of new products, technology and the way people live their lives now. I do think that the law needs a significant, consistent overhaul rather than a piecemeal approach, but let’s just consider some of the weird results the present system throws up. This is a MOSS* for all tabloid journalists….

* Mini One-Stop Shop

An odd rule applies to gingerbread men. No VAT is charged if the figure has two chocolate spots for its eyes, but any chocolate-based additions, such as buttons or a belt, mean VAT is payable.

The sale of a horse is standard rated. However, the sale of a dead one (for horse meat) is zero rated. I wouldn’t really want to dwell on the VAT planning aspects of this…

A downloaded purchase of the bible is standard rated while “saucy” top shelf magazines are VAT free.

So that’s what it’s called….. From HMRC guidance – “For the purposes of establishing the place of supply of services, stallion nominations (The right to nominate a mare to be covered by a stallion in one breeding season) and the covering of mares is treated as ‘work carried out on goods’”.

Food for wild birds is zero rated while food for caged birds is at 20%.

Well, what do you know?! Jaffa cakes are cakes, Pringles are crisps and now Lucozade Sport is a beverage. That’s what the Upper Tribunal has just ruled, so the drink is now subject to VAT. So now we know.

(And since this is VAT, we have to mention Jaffa cakes – again!) It was ruled as a fact that cakes go hard when stale whereas biscuits go soft.

Food that is too hot to eat can be classed as cold food for VAT purposes.

Orange juice is zero rated. Lemon juice is zero rated. Mix them, and you have a standard rated product.

Peanuts in shells are zero rated, salted peanuts are standard rated.

If your shop is burgled, it’s best to let the robbers take your stock. Goods lost to theft are not subject to VAT, but if cash (which customers have paid for goods) is taken from the till a VATable supply has still been made and VAT is due on it.

The sales of kangaroos are standard-rated but kangaroo steaks are zero-rated.

Rabbits are zero-rated, even if sold as pets. Sales of pets are standard rated.

The sales of counterfeit (illegal) goods are subject to 20% VAT, but the sale of counterfeit banknotes are not.

There was a planning scheme called the golden toothbrush, but it didn’t matter what colour the toothbrush was.

Ferret food has recently been ruled to be subject to 20% when it was VAT free from 1973.

Caviar is deemed a necessity in terms of VAT, while orange squash is a luxury item.

Buying a coffin is standard-rated but hiring a hearse is VAT free.

Children’s clothing with rabbit and gazelle fur (and even dog skin) is zero-rated but if it has Tibetan goat fur it is subject to VAT.

Tuition provided by a sole practitioner is exempt, but if the tutor incorporates then their supplies become standard-rated.

In the Spearmint Rhino case it was ruled that there is no VAT on lap dances.

Under some VAT schemes, zero rated and exempt supplies are subject to VAT (and even some which are “Outside the scope of UK VAT”).

Dog food for a poodle is subject to VAT but exactly the same food can be zero rated if it is for a Labrador.

Court of Appeal judgement on Subway hot food case

By   11 June 2014
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The CoA has just released its judgement in the Subway hot food case.  It concerns the liability of toasted sandwiches (known as Subs) with a hot filling; meatball marinara.

This is a lead case for a large number of claims submitted on the basis that VAT has been over declared on certain supplies of hot takeaway food, that are (it was argued) essentially the same as supplies that have obtained zero rating. The Court has dismissed the taxpayer’s appeal.

If you have any “hot food” claims lodged – please contact us for further information.

New house builds to be subject to 20% VAT?

By   9 June 2014
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Reports that a recently issued EC consultation document is proposing to harmonise VAT rates across Europe thus removing the UK’s zero rate have stirred up something of a hornet’s nest. Clearly, in this delicate (although slowly improving) climate for house builders an additional 20% cost could damage the market irrevocably adding £50,000 to the cost of a £250,000 house. Commentators in the trade have announced that it would be a disaster for new home buyers, the construction sector, and the UK economy in general.

However, are these reports in the national press all that they seem? Or is this another tabloid attack on the EC? Such consultation documents are issued regularly and they consider many aspects of VAT across the EC. An EC spokesman, when questioned about this issue, stated “the consultation was not pre-empting a move and considering VAT ‘in general’” Additionally, a spokesman for the Treasury announced “’The UK government has no intention of agreeing to such a proposal, and there is no consultation to change the zero tax rate”. Historically, UK authorities have fought doggedly to retain all of the UK’s zero rates because once they are removed, it is not possible under EC legislation, to reinstate them. The UK is unique in applying the zero rate to items such as food, new houses, books and newspapers and while it is not possible to widen or extend the scope of the zero rating, the UK is permitted, for the time being, to retain those which are in place. So, is there any truth in these “rumours”? It appears that the report was published by the Daily Mail, which in turn appears to have obtained the story from The Daily Express. Although there is a continuing will to harmonise VAT across the EC, I would be very surprised indeed if the UK was to be forced to standard rate new house builds. My personal view is that there appears to be a little mischief making here and the house building industry has enough to worry about rather than this imposed 20% price hike.

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