Government urged to review VAT food rules

(2 minutes to read)

Many of the rules for food and drink derive from the old Purchase Tax regime, which was replaced with VAT when the UK joined the EU in 1973.

The government are being asked to take the opportunity arising from the UK leaving the EU to revisit the overly complex rules surrounding VAT on food and drink.

The Chancellor announced at the Budget on 11th March 2020 that he intends to use ‘new freedoms’ when the Brexit transition period ends on 1st January 2021 to scrap the so called ‘tampon tax’ (the five per cent rate of VAT on women’s sanitary products).

The Association of Taxation Technicians (ATT) is now highlighting the opportunity to reduce the inconsistencies in other areas of VAT too.

Michael Steed, Co-Chair of the ATT Technical Steering Group, explained, “We encourage the Government to take the opportunity posed by the UK leaving the EU to take another look at how we apply VAT to food and drink.

“Many of the rules for food and drink derive from the old Purchase Tax regime, which was replaced with VAT when the UK joined the EU in 1973. As a result, they are often out of date and difficult to apply in the modern world.”

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“This has led in the past to the Tax Tribunal having to consider such intriguing questions as whether Jaffa Cakes are a cake or a biscuit, and whether Pringles are crisps or not. The decisions in these cases often throw up results which sound utterly ridiculous to the average person.”

For example, chocolate flavoured Nesquik attracts zero VAT while strawberry or banana flavoured varieties are subject to the standard rate of 20%. And a gingerbread man with chocolate eyes attracts zero VAT, but one with chocolate trousers attracts VAT at the standard rate of 20%.

Steed added, “The end of the Brexit transition period at the end of 2020 presents an opportunity for the Government to consult on ways to modernise and rationalise the VAT rules on food and drink. A clearer, more up to date set of rules would reduce confusion, and save both businesses and HMRC the time and costs associated with arguments over VAT treatment.”

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Why Dolan Accountancy?

Dolan Accountancy was set up by Simon J Dolan, the man behind the well-known brand SJD Accountancy. With over 25 years experience in the contracting marketing, Dolan Accountancy has the heritage, reputation and credibility you can trust. Working closely with our sister company, Contractor Umbrella, it means we can offer one low cost, fixed fee package at £95 + VAT per month. This gives you the flexibility of using both our Limited Company Accountancy Services and our award winning Umbrella Service, for one inclusive cost. We don’t believe in tiered packages or hidden extra fees, instead we aim to give you everything you need, including:

  • Free Company Formation – This is where it all begins. Once you have decided on an available name, we will form your company free of charge (if using our accountancy services) and it will be ready for you to use in as little as three hours.
  • Free use of Contractor Umbrella – With changes in Public Sector IR35 Legislation we understand that sometimes you are required to contract via an umbrella company. We will keep your limited company ticking over, while you work margin free via our sister company, Contractor Umbrella.
  • A Dedicated Accountant – Your accountant will be there for any company or personal tax advice that you require. We will never outsource work, even to internal teams.
  • Free Access to FreeAgent – The founder behind the multi award winning FreeAgent platform was one of Simon’s first clients, therefore it only seems fitting that we offer all of our clients access to FreeAgent, free of charge.
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