Happy 40th birthday, VAT

One of Britain's most controversial taxes turned 40 on 1 April. But few businesses will be breaking out the party poppers. According to Deloitte, VAT has raised £1,639bn to date. That's enough to buy its own damn present.

by Rebecca Burn-Callander
Last Updated: 09 Oct 2013

VAT was launched by Chancellor of the Exchequer Anthony Barber on All Fools’ Day in 1973 at a time when the British economy was arguably in an even worse state than it is now. But anyone who was hoping it was all an elaborate hoax was soon disappointed.

In the 40 years since, the tax has raised £1,639bn for government, estimates business advisory firm Deloitte. It has also increased from a relatively modest 50 pages of law in the Finance Act 1972 to reach a massive 379 pages in domestic VAT law with the secondary legislation accounting for a further 669 pages.

No wonder 2,000 professionals now make their living exclusively dealing with VAT in the UK (outside HMRC, that is).
 
Deloitte's VAT man Daniel Lyons comments: 'VAT has touched every area of economic activity in the UK for the past 40 years.  Just look at your weekly expenditure: some groceries, telephone, gas and electricity bills, the petrol in your car, a coffee on the way to work, and a beer in the evening.

'VAT is a permanent fixture and it is a major tax that contributes a significant proportion of government revenue, both in the UK and elsewhere.  As a revenue generator, it is attractive to governments because it is relatively easy and cheap to collect.'

VAT is also the cause of that famous argument: is a Jaffa Cake a cake or a biscuit (VAT is payable on biscuits but not cakes).

Know the answer? Leave us a comment below.

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