Just a VAT Dave

sirbhp

LE
Book Reviewer
Can anyone explain to me what was the premise behind VAT or the old purchase tax? How did that government get away with it . We have Income Tax, road Tax ,Insurance Tax and loads of other taxes. Now that the financial crisis is over will vat ever go back to 10% ?

I just think that its a bloody liberty that you have to pay another 20% of the price on an Item just to give to the government , where as Company directors and self employed often get their firm to purchce the item and claim the VAT on it .
 
Wasn't VAT introduced to replace the old Purchase Tax, and was instituted to pay our contribution to the then European Community. VAT, or Mwst, or BTW is a European tax, and cannot be lowered in any state. Now of course we have the ability to reduce it as necessary as per the Tampon Tax (if the budget rumours are held to be true).
 

endure

GCM
At least VAT is consistent. Purchase Tax was levied on what the government of the day considered to be 'luxury goods'. The highest Purchase Tax rate was 33%.
 

Troy

LE
I remember it started off at 8%. It gradually crept up; 15%, 17.5% down to 15% for the financial crisis, and now up to a wapping great 20%. It would be a for-certain vote winner to bring it right down below 10% or even to abolish it. In fact, although I hate Labour, I would probably vote for them if they guaranteed to abolish it completely. But it's for certain they wouldn't.

Now we are out of the EU I'm expecting VAT to be reduced to something very low indeed.

Edit to add: This is an ironic comment, I am sure this isn't actually going to happen. Just a very rare Brexit comment from me....
 
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CanteenCowboy

LE
Book Reviewer
VAT was introduced as part of the preparation for joining the EEC, and was introduced to raise revenue for our EEC/EU contributions, although the concept of VAT goes back to the early 20th century. It’s been a while since I did my VAT training but I do remember that EU government’s have some leeway at what level it’s set , or imposed, if you prefer, at, iirc between 17.5 and 20%. It’s also the tax system most often under attack from organised criminals, whilst we’re now leaving the EU it’s highly unlikely that the government will be thinking of giving up a revenue stream.
 
For me the one of biggest cash-cow rips is fuel which levies the VAT compounded onto the fuel tax.
In essence you pay fuel tax, then VAT on fuel duty.
Basically £1.00 of fuel attracts nearly 80p for the Treasury.
28 billions in all- fuel tax receipts to HMRC in 2019 apparently.
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I remember it started off at 8%. It gradually crept up; 15%, 17.5% down to 15% for the financial crisis, and now up to a wapping great 20%. It would be a for-certain vote winner to bring it right down below 10% or even to abolish it. In fact, although I hate Labour, I would probably vote for them if they guaranteed to abolish it completely. But it's for certain they wouldn't.

Now we are out of the EU I'm expecting VAT to be reduced to something very low indeed.
The trouble with binning it is, how do you make up the shortfall in revenue for the taxman? An increase in income tax is going to have a disproportionate effect on someone.
 
, where as Company directors and self employed often get their firm to purchce the item and claim the VAT on it .
It’s not company directors and the self employed. It’s any VAT registered business.
When they finally sell their product, instead of paying the VAT man the amount on the final bill they pay that amount less any VAT they have already paid along the way.
What they can do is to reclaim/write off VAT that they have already paid for what they don’t ultimately sell.
Eg certain needs of the business such as tools aren’t sold so don’t have a vat pi iLife, and shoplifted or out of date food doesn’t get sold on then there is no ultimate VAT.

I knew a guy who had a village shop and couldn’t be bothered to rotate stock on the shelves, this meant buyers took the newest item and he eventually binned & wrote off food thinking he was getting his money back from the tax man.
It took a lot of explaining before he understood that he was losing his wholesale product cost.
e.g. wholesale 50p, RRP £1.20 - it would cost him 60p including VAT and all he got written off was the 10p VAT paid. He had to sell one to break even on the one he wrote off
 
Currently VAT is 0%, 5% and 20%
Standard rate at 10% only applied for a short time in the 70s. It’s not about the ‘financial crisis’
(There was only a reduction in one year to boost the economy)
Otherwise it’s always just been a normal method of government collecting revenue
 

Dark_Nit

LE
Book Reviewer
VAT is a cunning plan.

It is collected by the seller on behalf of the government.

Our company is VAT registered and it's a PITA if you are VAT registered.

E.g. if one of our staff works away from home we can reclaim the VAT on their reasonable accommodation and subsistence costs, but then other things are zero rated.

I guess that we make a small profit technically but it nowhere covers the cost of administering it.

So the government makes money and we collect it for them.
 

Troy

LE
. . . . to be instantly replaced with a Goods and Services Tax. Or whatever.

That Revenue isn't going to generate itself, you know - how else is our shiny new railway line going to be built?!



Nah: see above.
Don't get me wrong, I'm certain VAT will remain, or be called something else instead. Once a tax is introduced, no Government will be in a hurry to scrap it.
But it started at 8% and people grumbled about it - if it started straight off at 20% there would have ben riots!
 
Don't get me wrong, I'm certain VAT will remain, or be called something else instead. Once a tax is introduced, no Government will be in a hurry to scrap it.
But it started at 8% and people grumbled about it - if it started straight off at 20% there would have ben riots!

. . . and it's taken you this long to figure out what 'government' means? :cool:

Don't forget, Income Tax in the UK was proposed in 1798 as a temporary measure to fund the Army and Navy during the Napoleonic Wars.
 
I remember it started off at 8%. It gradually crept up; 15%, 17.5% down to 15% for the financial crisis, and now up to a wapping great 20%. It would be a for-certain vote winner to bring it right down below 10% or even to abolish it. In fact, although I hate Labour, I would probably vote for them if they guaranteed to abolish it completely. But it's for certain they wouldn't.

Now we are out of the EU I'm expecting VAT to be reduced to something very low indeed.
I am sure you will be very disappointed.
 
For me the one of biggest cash-cow rips is fuel which levies the VAT compounded onto the fuel tax.
In essence you pay fuel tax, then VAT on fuel duty.
Basically £1.00 of fuel attracts nearly 80p for the Treasury.
28 billions in all- fuel tax receipts to HMRC in 2019 apparently.
View attachment 454345
What’s going to replace that when we're all driving lovely electric cars?
 

Chef

LE
. . . and it's taken you this long to figure out what 'government' means? :cool:

Don't forget, Income Tax in the UK was proposed in 1798 as a temporary measure to fund the Army and Navy during the Napoleonic Wars.

And it was temporary*

From Wiki:

Pitt's income tax was levied from 1799 to 1802, when it was abolished by Henry Addington during the Peace of Amiens. Addington had taken over as prime minister in 1801, after Pitt's resignation over Catholic Emancipation. The income tax was reintroduced by Addington in 1803 when hostilities with France recommenced, but it was again abolished in 1816, one year after the Battle of Waterloo. Opponents of the tax, who thought it should only be used to finance wars, wanted all records of the tax destroyed along with its repeal. Records were publicly burned by the Chancellor of the Exchequer, but copies were retained in the basement of the tax court.

The highlighted bits show that government have always been duplicitous.

*Reintroduced in 1842 by Sir Robert Peel, still with us.
 

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