VAT ON LUXURIES: Were the laws of common sense considered before this enactment?
The law requires us to pay sales VAT on a wide range of items considered to be ‘non-essential‘.
Check out the VAT on these ten products or services listed below. It would not be unreasonable to class them as ‘vital‘ for most individuals.
VAT is a tax on consumption first introduced in 1973. HM Revenue and Customs (HMRC) administers and collects the levies. The UK government has introduced a levy of Value Added Tax on these 10 ‘luxuries‘.
As you will see below, there also exists a reduced rate of 5% and in some cases a zero rate may apply instead. Consider this roundup of things we get forced to pay VAT on in the United Kingdom. Do the rules appear to show a whole host of confusing quirks and strange peculiarities?
Government class sanitary protection products, such as tampons and maternity pads, as non-essential. Thus, they get classified as luxury items for Value Added Tax purposes.
Feminine period products were standard-rated at one time (i.e. 20%). Then a Labour Member of Parliament managed to get the VAT rates reduced to 5% back in the year 2000.
Campaigners vehemently disagree with the so-called ‘tax on women‘. They are actively trying to get the law abolished altogether.
A recent petition to the government called for a change in the law. It gained more than 250,000 signatures. But, Parliament insisted that EU law does not allow the UK to apply a zero rating for tampons. In fact, they would need agreement from all European Commission member countries.
2017 Update to this Article
In August 2017, the Co-op Group joined two other UK supermarkets pledging to cover the cost of the ‘tampon tax‘. The popular retailer will absorb the VAT cost and pass it on to their customers. That means more than 70 different sanitary products for women will drop by 5%.
Tesco and Waitrose already announced similar measures. But, it seems that Asda and Sainsbury’s will still charge VAT on sanitary products.
Related News: UK Rules Guide to Tax on Shopping and Services
Tampon Tax: Budget 2020
During the 2020 budget, the UK Government announced that the 5% rate of VAT has been abolished on women’s sanitary products starting from the 1st of January 2021.
Free Period Products for Schools
Period poverty (e.g. having a lack of access to sanitary products due to financial constraints) affects many school age children and college students in the United Kingdom.
The Department for Education (DfE) introduced a scheme offering free period products for all schools and colleges from the 20th of January 2020.
Note: The final round of the Tampon Tax Fund now allows charities to apply for part of the £11.25 million funding, according to a press release dated the 21st of May 2021.
Child Car Seats
Car seats manufactured for children receive a reduced rate of 5% VAT. Child protective equipment liable for Value Added Tax also includes the following items:
- Children’s car seats and travel systems.
- Child safety seats.
- Children’s booster seats.
- Booster cushions for children.
- Carrycots with restraint straps (if they are part of a pram system).
This seems odd to most parents – and Halfords the retailer. Certain safety equipment is a requirement in law for children up to the age of 12 years or a height of 135cm. Thus, why should it be ‘VATable‘ at all? Especially when you consider that children’s clothing is zero rated.
Gas and Electricity Utilities
Household water bills are standard rated. Yet, gas and electric utilities get reduced to a rate of 5% VAT for residential domestic use. Most households consider energy as an essential utility – don’t they?
The UK Government has pledged to reduce fuel bills. But cash-strapped households would benefit hugely if the tax got scrapped entirely. The Department of Energy and Climate Change did a survey. DECC suggest the average household would save almost £70 per year if this was to happen.
A reduced rate of VAT is set up for many home energy-saving installations and efficiency measures such as:
- Solar panels
- Wind turbines
- Wood-fuelled boilers
- Air-source heat pumps
So how strange is it that the installation of secondary glazing, double glazing, an energy-efficient condensing gas boiler, or fitting energy-saving gadgets yourself, does not qualify for the same benefit?
Certain mobility aids for the disabled and elderly are taxable. But, ill and disabled people do not currently pay VAT on mobility aid installations.
That means many senior citizens who need mobility aids installed in their homes must pay 5% on the work and supply.
Whether this is fair or unfair, the tax applies to essential things such as:
- Grab rails
- Stair lifts
- Bath lifts
- Built in shower seats
- Walk-in baths with sealable doors
Hot Food Takeaways
Cold takeaway food and drink is zero-rated for VAT. But, hot takeaway food and drink is subject to the standard rate VAT (20%).
Hot food takeaways have VAT applied if the food is hot at the time it gets provided and one or more of the following apply:
- It got heated for the purposes of enabling it to be consumed hot.
- It got heated to order.
- It got kept hot after being heated.
- It’s provided to a customer in packaging that retains heat. The same applies to any other packaging that is specifically designed for hot food.
- It’s advertised or marketed in a way that indicates that it gets supplied hot.
So let us give you an example of how the law works for hot food takeaways.
Warm pasties and sausage rolls that get baked, and are in the process of cooling down, are zero-rated. Yet, a toasted sandwich is subject to Value Added Tax.
Books, newspapers, magazines, and many other publications are exempt from VAT. Thus, it seems a little odd that digital e-books attract the full standard rate. This applies in the United Kingdom and the rest of the European Union.
According to EU regulations: “Different VAT rules apply to paper and digital books. This is because the supply of text by electronic transmission counts as a digital service rather than a cultural item”.
Chocolate Covered Biscuits
In fact, UK VAT rules do not apply to bakery products such as bread, biscuits and cakes. This is because they get considered to be essential items – so they are zero-rated.
On the other hand, biscuits that are wholly or partly covered in chocolate get classed as confectionery. Thus they get deemed to be a standard-rated luxury item. It is a little peculiar that cakes with a similar make-up are not.
Ice Cream and Lollies
Frozen foods are mostly zero-rated. But ice cream, iced lollies, frozen yoghurt, and sorbets are subject to standard rate VAT.
Bizarrely, it is because the design and manufacture of these food types is to get eaten while frozen. Zero-rated categories only apply to foods which need cooking or need to have thawed completely before eating.
Roasted or salted nuts which have been de-shelled are subject to standard rate VAT. But if they get sold with their shells on (like monkey nuts or pistachios) they are zero-rated. If you are in a real nutty mood, you can beat this bizarre tax by going for a mixed assortment.
Her Majesty’s Revenue and Customs allow mixed bags containing only a small quantity of standard-rated nuts to be zero-rated.
HMRC: “Fruit and nut mixes (including Bombay and similar savoury mixes) where the weight of any standard-rated items, such as sweetened fruits, or pieces of chocolate or roasted nuts does not exceed 25% of the net weight of the whole.”
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