On 1 April 2023, VAT celebrates its 50th birthday.
Many would think that this span of time would be long enough to sort out and understand the basic principles of the tax. However, we are still arguing over basic principles such as single and multiple supplies, what is a land transaction, what is a Transfer of a Going Concern (TOGC), and when is an activity a business activity for VAT purposes?
On 1st April 1973, VAT was introduced in the UK – some may say that it was one of the cruellest April fool’s jokes ever!
In the words of the then Chancellor of the Exchequer Anthony Barber: “VAT will be a simple tax, easy for taxpayers to understand and easy for the authorities to administer.”
With the benefit of hindsight, we can certainly say that this comment was untrue – VAT is certainly not simple.
A dry tax?
Many view VAT to be a dry tax that they wouldn’t touch with a bargepole. But it may surprise you to learn how often I talk to people who profess no interest in the tax but who, in the next breath, mention Jaffa Cakes, the pasty tax, and Scottish snowballs (as opposed to Swedish snowballs).
In case you are not familiar with the above, these involved:
- Jaffa Cakes – cake or biscuit?
- Pasty tax – hot or cold takeaway food?
- Scottish snowballs – cake or confectionery?
Note that Scottish snowballs are chocolate and coconut covered marshmallows and are different from Swedish snowballs.
A cake or not a cake
For those who do not know what a cake is, the Tribunal chairman helpfully commented in his judgement:
“A snowball looks like a cake. It is not out of place on a plate full of cakes. A snowball has the mouth feel of a cake. Most people would want to enjoy a beverage of some sort whilst consuming it. It would often be eaten in a similar way to cakes; for example, to celebrate a birthday in an office.
“We are wholly agreed that a snowball is a confection to be savoured but not whilst walking around or, for example, in the street. Most people would prefer to be sitting when eating a snowball and possibly, or preferably, depending on background, age, sex, etc with a plate, a napkin or a piece of paper or even just a bare table so that the pieces of coconut which fly off do not create a great deal of mess”.
A toast to VAT
So, on VAT’s 50th birthday, I raise a toast to the first 50 years and to the next 50, too. No doubt the tax will continue to confuse, irritate and confound, but it will never be dull for (sad) practitioners like me.
Finally, I will leave you with the famous/infamous or perhaps just purely exasperated comments of Lord Justice Sedley;
“Beyond the everyday world, both counsel have explained to us, lies the world of VAT, a kind of fiscal theme park in which factual and legal realities are suspended or inverted”.
If you have any VAT queries that you need help with, get in touch with our expert VAT team.
