VAT's Up?

It's a milestone that, one can safely assume, is unlikely to be celebrated by British taxpayers.

VAT, one of the country’s most controversial taxes, reaches its 40th birthday on Monday.

On 1 April 1973, Value Added Tax was introduced to Britain, a requirement of the decision to join the European Economic Community three months earlier.

In its first year, VAT was levied at just 10 per cent and raised only £1.5billion for the public purse.

But, 40 years later, the standard rate has doubled to 20 per cent. It is now worth a record-breaking £100billion a year, nearly four times more than the amount paid in council tax.

The cost of VAT, which is so notoriously complicated that it was once dubbed ‘a kind of fiscal theme park’ by a judge, is eye-watering.

A total of £1.6trillion – or £1,639billion – is estimated to have been paid in VAT since its introduction in 1973, according to a report by the accountants Deloitte, published today.

It was introduced by the Conservative Chancellor Anthony Barber, who insisted it was a ‘simple tax’.

But there is very little straightforward about VAT, which has such fiendish complications that it has resulted in a long – and growing – list of expensive High Court battles.

For example, a Baked Alaska is ‘zero-rated’, which means no VAT is charged, but ice cream is ‘standard-rated’, which means the tax is charged at 20 per cent.

Similarly, the hiring of a hearse is VAT-free, but the purchase of a coffin is taxed. Corn for popping is zero-rated, but popcorn attracts the tax.

Happy Easter, I am in the office doing our VAT return. We have transactions with Microsoft, Google, Amazon et al in the UK, in the EC but outside the UK, as well as outside the EU entirely in the USA and sifting them makes my eyes water every quarter. In a fortnight I will have to do the EC Sales List. It is for a different time period and treats services differently even though it goes to the same HMRC.

I will need a drink later this afternoon.