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claytonender · 25-11-2008, 22:29

[quote=Neil;654049]I wonder if this VAT cut will actually cost shops money?

They will have to change the VAT rate that has sat still for 34 years.
I wonder if it will be easy for all the online sites to change their VAT levels. I know it should be easy but you never know.
quote]

You are incorrect in saying that the VAT rate has sat still for 34 years - there have been several changes in the rate since it was first introduced in 1973. The last major change to standard rate VAT was in 1991, when it was increased from 15% to 17.5% in an attempt to reform the ill thought out 'Poll Tax' when millions of people were suddenly expected to pay exorbitant bills, compared to the old Rateable Value system.

(I copied this from a report produced by an Australian University)

VAT was originally introduced in the UK in 1973 at a standard rate of 10%.
In 1974, this was cut to 8%, but VAT was levied at an additional "luxury
rate" on a range of items at a rate of 25% from 1975. The wide disparity
between the two rates and the range of anomalies in the relative taxation of
items falling in different categories led to the 25% rate being reduced to
12.5% in 1976. However, the administration of the two rates remained
difficult and further revenue was required to permit reductions in the rates of
income tax. In 1979, therefore, the two positive rates of VAT were amalgamated at 15%. Much later, following the poll tax disaster, a substantial slice of local government taxation was also replaced by a further increase in the rate of VAT to 17.5% in 1991.

The VAT base has also been extended since 1973. An early change was that
the original concession for food and drink did not seem to be quite so
appropriate for confectionery, ice cream, soft drinks and potato crisps, and
they were duly subject to VAT from 1974. Other anomalies between goods
and services subject to VAT and those not taxed continued to cause problems
and some further extensions have occurred since 1973. For example,
imported services became taxable from 1978 and a further range of items
from 1989.

One such issue that was quite noticeable was that originally meals that were
eaten on the suppliers’ premises were subject to VAT but "take-away" meals
were not, including the British staple of fish and chips. The result was a
significant shift in restaurant meals to "take-away" service and VAT was duly
extended in 1984 to hot food consumed off the premises. After a range of
entertaining but unsuccessful attempts to avoid the new provisions, such as
free hot fish and chips to go with the VAT-free (cold) salt and vinegar, this
change was generally accepted by taxpayers.

25-11-2008, 22:29	#35
claytonender Senior Member Join Date: Nov 2004 Location: Clayton-le-Moors Posts: 892 Liked: 0 times Rep Power: 273	Re: Tax Cuts! [quote=Neil;654049]I wonder if this VAT cut will actually cost shops money? They will have to change the VAT rate that has sat still for 34 years. I wonder if it will be easy for all the online sites to change their VAT levels. I know it should be easy but you never know. quote] You are incorrect in saying that the VAT rate has sat still for 34 years - there have been several changes in the rate since it was first introduced in 1973. The last major change to standard rate VAT was in 1991, when it was increased from 15% to 17.5% in an attempt to reform the ill thought out 'Poll Tax' when millions of people were suddenly expected to pay exorbitant bills, compared to the old Rateable Value system. (I copied this from a report produced by an Australian University) VAT was originally introduced in the UK in 1973 at a standard rate of 10%. In 1974, this was cut to 8%, but VAT was levied at an additional "luxury rate" on a range of items at a rate of 25% from 1975. The wide disparity between the two rates and the range of anomalies in the relative taxation of items falling in different categories led to the 25% rate being reduced to 12.5% in 1976. However, the administration of the two rates remained difficult and further revenue was required to permit reductions in the rates of income tax. In 1979, therefore, the two positive rates of VAT were amalgamated at 15%. Much later, following the poll tax disaster, a substantial slice of local government taxation was also replaced by a further increase in the rate of VAT to 17.5% in 1991. The VAT base has also been extended since 1973. An early change was that the original concession for food and drink did not seem to be quite so appropriate for confectionery, ice cream, soft drinks and potato crisps, and they were duly subject to VAT from 1974. Other anomalies between goods and services subject to VAT and those not taxed continued to cause problems and some further extensions have occurred since 1973. For example, imported services became taxable from 1978 and a further range of items from 1989. One such issue that was quite noticeable was that originally meals that were eaten on the suppliers’ premises were subject to VAT but "take-away" meals were not, including the British staple of fish and chips. The result was a significant shift in restaurant meals to "take-away" service and VAT was duly extended in 1984 to hot food consumed off the premises. After a range of entertaining but unsuccessful attempts to avoid the new provisions, such as free hot fish and chips to go with the VAT-free (cold) salt and vinegar, this change was generally accepted by taxpayers.