A few interesting facts about VAT

This is a Christmas special that I wrote for Harry's blog http://www.trivialpursuits.org/. Hope you enjoy...

To help whip up some enthusiasm for my forthcoming article on “Growth and Taxation” (yes, the title may be dry but the content will juicy), here come some Christmas VAT pleasers to add extra entertainment to your family gatherings this December.
Britain’s favourite VAT fact, as demonstrated by a Sun newspaper poll on the topic (this is not the link but I couldn't find the real one), concerned the biscuit status of our beloved Jaffa Cake. This fervent argument which rumbled all the way to tribunal, all stemmed from differing treatment of chocolate covered biscuits (20% VAT) and chocolate covered cakes (0% VAT). Whilst the taxman would contend (and still does) that it looks like a biscuit, is packaged like a biscuit, is used like a biscuit, Sun readers think it’s a biscuit, and basically it is a biscuit, the courts thought otherwise. And a VAT fact was established: cakes go hard when stale whereas biscuits go soft. FACT.

And Jaffa’s are not alone. Various interpretations of the tax law on food have lead business to make some quite bizarre claims about their own products. Pringles were so keen to get away from the 20% VAT charged on “potato crisps and similar products” that they went all the way to the Court of Appeal to claim that Pringles are not made from potato. Which makes you wonder what they are made from; I think “oil” featured heavily in the discussions. And Lucozade are currently of the view that Lucozade Sport is not, as might be thought, a beverage, but in fact a “functional food”. Watch this space for more news on that battle.

Because, you see, the watchful eye of VAT encompasses all we do. There is really no escape. Just look to the judgment in R&J Polok t/a Supreme Escorts; establishing the VAT FACT that just because what someone is doing is illegal, it doesn’t mean it’s not subject to VAT. In its summary the High Court surmised that to not charge VAT on Supreme Escorts’ services would give a competitive advantage over escort and introductory agencies that did not provide sexual services. You can’t argue with logic like that.

So think fondly and muse on VAT over the Christmas period. And next time you enjoy a Toasted Sub, you can ponder on whether Subway were correct when they maintained that it is not a “hot food”. And as you slurp its fruity goodness give a thought to whether your Innocent Smoothie is really, in fact, a “liquefied fruit salad”?