Odd VAT Rules You May Not Be Aware Of

31 July 2018, 15:48

So… how much do you know about VAT? Maybe you are confident in saying books do not attract VAT (you’d be correct in the case of physical books, but not for digital ones). Everyone has heard of the tampon tax, but there are numerous other items that incur VAT as well. Some of them are very odd; there can be a very fine line between what does and doesn’t include value-added tax.

It seems funny now to think that VAT was sold to the public as a ‘simple tax’ when it was first introduced in the Seventies. Nowadays, most people would agree VAT is anything but simple. The more successive governments make changes to the system, the more complicated it has become. It has seen court cases to determine whether something should incur VAT or not (remember the infamous Jaffa Cake case?).

So, we thought we would look at some intriguing facts about VAT that might leave you scratching your head. For example, let’s say you head out to a bakery today because you have an urge to eat a gingerbread man. Be careful what you choose. If the gingerbread man has eyes made from two dots of chocolate, your treat will be free of VAT. However, if the baker has chosen to give him a belt or some chocolate buttons down his front, get ready for a higher price – VAT must be charged on that. Who knew a clothed gingerbread man was more expensive?

Bees are another oddity in the world of VAT. Few of us will ever have cause to buy or sell bees, but if you do, you may already know about this rule. The sale of bumblebees incurs the standard rate of VAT. However, honey bees aren’t covered, and are sold VAT free.

If you think about people you know with pets, chances are you know one or two with rabbits. You would probably struggle to think of anyone who owns a ferret. Yet rabbits – despite being a popular pet, especially among children – aren’t considered pets as far as the VAT rules are concerned. Guess what? Ferrets are. 

We mentioned the use of chocolate in the creation of gingerbread men. Well, it also comes into play if that same baker decides to bake a batch of shortbread before covering it in chocolate. Buy a slice of that to go with your tea and you will pay VAT on your purchase. However, if the baker converts some of those treats into Millionaire’s shortbread by putting caramel onto the shortbread before adding the chocolate, you won’t pay any VAT on it.

There are plenty more oddities like this within the VAT system. No wonder so many people are confused by it!