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40 years of VAT

£1639 billion has been raised

1 April 2013

Deloitte, the business advisory firm, estimates £1639 billion has been raised by VAT since it was launched on All Fools’ Day in 1973, by Chancellor of the Exchequer, Anthony Barber.

Daniel Lyons from Deloitte's VAT team, marking the anniversary of VAT said: “VAT has touched every area of economic activity in the UK for the past 40 years. Just look at your weekly expenditure: some groceries, telephone, gas and electricity (although not water) bills, the petrol in your car, a coffee on the way to work, and a beer in the evening.

“VAT is a permanent fixture and it is a major tax that contributes a significant proportion of government revenue, both in the UK and elsewhere. As a revenue generator, it is attractive to governments because it is relatively easy and cheap to collect. Its complexities have been demonstrated by some high profile food related VAT cases from Jaffa Cakes to Ribena and the famous chocolate tea cakes case.”

Increasing Complexity
The VAT legislation started life in the Finance Act 1972 and comprised a modest 50 pages of law. Currently domestic primary VAT law (now the VAT Act 1994) covers 379 pages and the secondary legislation accounts for another 669 pages.

VAT as a Career
We estimate that (outside HMRC) over 2,000 professionals now earn their livings practising VAT in the UK.


Notes to editors
Some VAT food cases:

United Biscuits (UK) Ltd (No. 2) Decided 21 August 1991
The well-known ‘Jaffa Cakes’ case about whether Jaffa Cakes were zero-rated as cakes or standard-rated as biscuits. After reviewing the evidence (including a giant Jaffa Cake the size of an “ordinary” cake) the tribunal decided that they were zero-rated.
Nature’s Balance Ltd (LON/93/2953A) decided 1995
The tribunal found that a dietary supplement product consisting of edible micro-algae compressed into tablet form was not food, even though the natural dried product might be accepted as food. In its decision, the tribunal neatly described the nature of a dietary supplement as no doubt good for you but not themselves food.
North Isles Shellfish Ltd (EDN/93/0250) decided 1996
VAT treatment of fish sold as lobster bait. The tribunal found that it qualified for zero-rating. (In addition, its use as bait was no different from its further use in fattening the lobsters for sale, so it was also zero-rated as an animal feeding stuff under general item 2 when sold as a bait.)

Smith Kline Beecham (LON/95/1704A) decided 1996
The tribunal ruled that the inclusion of added fibre in Ribena blackcurrant drink did not change its essential nature as a beverage, and it was therefore still standard-rated.
Ocean Grown UK Ltd decided 31 January 2008
Wheatgrass drink - found not to be a “beverage” and so not excluded from zero-rating. Of interest from the Tribunal’s comments: “…We sampled the juice and found it quite unpleasant …” and “…neither of the members of the Tribunal would take it for pleasure, and it seems highly unlikely that people would choose to drink it for pleasure ...”, for example.

Procter & Gamble UK Court of Appeal decision 20 May 2009
VAT treatment of Pringles. The case turned on whether Pringles were "potato crisps, potato sticks, potato puffs and similar products made from the potato or from potato flour or from potato starch". A “potatoness” test was suggested in the High Court. They were standard-rated as it was decided they were “potatoey”.
Marks and Spencer finally decided by the House of Lords in 2009
The “chocolate covered teacakes” case. Not strictly a food liability case but worthy of a mention, perhaps, as one of the longest running VAT cases, if not the longest running case. It concerned claims for repayment of VAT on chocolate covered teacakes which HMRC originally viewed as standard-rated but later accepted. The claims got caught up in the saga of HMRC’s faulty implementation of the UK’s capping provisions and led to a case that began in 1996 and was eventually finally decided in the House of Lords in 2009, after two trips to the European Court for guidance on aspects of EU law.
Innocent Ltd decided 25 October 2010
Fruit smoothies - whether excluded from zero-rating as a “beverage”. The Tribunal decided that “…The fact that a fruit smoothie was also a food did not remove it from the category of beverage - It was not, therefore, eligible for zero-rating …”.

About Deloitte
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see for a detailed description of the legal structure of DTTL and its member firms.

The information contained in this press release is correct at the time of going to press.

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Media contacts

Laura Parsons
Deloitte LLP
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