Well, it seems people just can’t get enough of the Strawberries & Creme M&S sandwich. Or, at least my email from a couple of weeks ago got people asking me lots of VAT questions!
There are lots of quirks to VAT and, to demonstrate, I thought I’d (re)share a video that Billie recorded a little while ago with 10 “fun” facts about VAT. (And resharing has also helped with my “scheduling this email before my hols” lesson from last week!)
- Did you know that gingerbread men are classed differently according to the decorations that are on them? If it has just two chocolate spots for eyes, then no VAT is charged… But anything else and VAT rules apply!
- Bumblebees are taxable under VAT, but honeybees get away scot-free.
- Chocolate shortbread has VAT on it but, if you add a layer of caramel making it a MILLIONAIRE’S shortbread, it doesn’t.
- How luxurious is caviar? Not enough to be subject to VAT! As a general rule, VAT is applied to luxury foods but not essentials. Whilst petrol, poodle food, orange squash and ice cream are categorised as luxury – incurring VAT charges, HMRC has decided that lap dances, caviar and Labrador food are not a luxury and have no VAT!
- When you buy a coffin, there is VAT on it. However, transporting that coffin through hiring a hearse has none.
- Spot the Ball, a game developed by betting operator Sportech ,was the subject of a VAT case at the Court of Appeal in March 2013. Originally, HMRC viewed the game as one that required skill, meaning it would be subject to VAT. However, Sportech appealed this, proving that the game was one of chance, meaning it was not subject to VAT. As such, HMRC made a £97m VAT repayment in 2016 following various appeals to the courts.
- Children’s car seats have a reduced VAT rate of 5%, which seems strange charging any amount for the safety of children.
- Crisps also have funny rules. Potato chip snacks are subject to standard VAT charges. However, maize and corn-based snacks are exempt. This has led to high profile court cases such as with Pringles in 2008. Procter & Gamble, the parent company of Pringles lost the court case. The company argued that since the product is made up of just 42% potato that sales should be exempt from tax. However, a High Court judge ruled that there is more than enough potato content, meaning there was tens of millions of pounds in VAT outstanding.
- Some nuts, particularly those with shells on such as pistachios and monkey nuts are VAT zero-rated! Strangely enough, de-shelled nuts are all subject to standard VAT.
- Hot takeaway food and drink is subject to standard VAT, whilst cold food and drinks are zero-rated! However, hot takeaway food can avoid tax if it is has been left to cool down and doesn’t need to be sold or consumed whilst hot. This includes, for example, bread, pies and pasties in bakeries. The famous “Pasty Tax” case in 2012 led to a five-part test to decide whether to charge VAT.
So, as you can see, VAT is indeed a complex and quirky tax.
If you have any questions, please email su*****@*********************co.uk or give us a ring on 0151 380 8084.
Many thanks
Jon