Chancellor George Osborne to close VAT loopholes

 

Tax breaks on items from luncheon vouchers to static caravans will be scrapped as a result of the Budget.

Chancellor George Osborne announced plans to close loopholes and remove anomalies from the way VAT is applied, meaning more items will be hit by the 20% tax.

The price of hot food from supermarkets such as rotisserie chickens could rise as a result of the changes.

Mr Osborne said: "We will also address some of the loopholes and anomalies in our VAT system.

"For example, at present, soft drinks and sports drinks are charged VAT; sports nutrition drinks are not.

"Hot takeaway food on high streets has been charged VAT for more than 20 years; but some new hot takeaway products in supermarkets are not.

"And some companies are using the VAT rules that exempt the rental of land to avoid tax that their competitors are paying.

"We're publishing our plans today to remove loopholes and anomalies, but we keep the broad exemptions on food, children's clothes, printed books and newspapers."

The Budget red book said: "Over time, significant anomalies have developed in the VAT system. These cause very similar products to be taxed very differently.

"Budget 2012 announces that the Government will take steps to correct certain anomalies.

"From 1 October 2012, VAT will be extended to reduce anomalies, including the use of self storage (to align it with other forms of storage) and alterations to listed buildings (to align with the existing VAT treatment of repairs).

"The Government will also close loopholes in the VAT system to prevent avoidance and ensure compliance.

"From 1 October 2012, VAT will be extended to close loopholes, including by applying it to hairdressers' chairs (to make clear that their rental is already subject to VAT), static holiday caravans (to bring in line with mobile caravans) and certain hot food (because most hot food is already subject to VAT)."

A wide range of historic reliefs on other duties will be scrapped as part of the Government's move to simplify the tax system.

The move follows a report by the Office of Tax Simplification in March last year which identified a number of tax breaks which could be scrapped.

From April 6 next year, the 15p daily relief on luncheon vouchers provided by workplaces, originally introduced in 1946 when food was still rationed, will disappear and the full value of the benefit will be taxable.

Angostura bitters, an essential ingredient for cocktails such as pink gin, will become subject to excise duty from April 1, 2013, as will black beer - a potent brew made by one producer in West Yorkshire.

Historically, black beer was viewed to have medicinal properties. But, as the Office of Tax Simplification notes "at approximately 8.5% abv it would not be considered to be a 'health product' today".

The Treasury forecasts that removing the VAT anomalies and closing loopholes will bring in £125 million in 2012/13 rising to £350 million in 2016/17.

Labour MP Diana Johnson (Hull N) complained about the impact of imposing VAT on caravans.

She said: "This will have a real impact on the economy in Hull because we manufacture a great deal of the caravans in this country.

"I understand it could almost reduce demand by 30%, another hammer blow."

Labour Treasury spokesman Owen Smith said: "The decision to slap VAT on more regular purchases is another stealth tax on middle and lower income families.

"The OBR has confirmed that this will drive up inflation and hit consumption. It will increase the cost of a haircut, a bacon sandwich, a sausage roll, or a caravan holiday. These are the kinds of changes which will hit families in the middle.

"The Chancellor already raised VAT to 20% in 2011 and this is costing families with children an average of £450 a year - and this will only add to that figure. Labour has called for a temporary cut in VAT as part of our five point plan for jobs and growth, to ease the squeeze on families and get our stalled economy moving again."

Bakery chain Greggs said it would make "strong representations" about Mr Osborne's plan to close VAT loopholes.

A spokesman said: "We do not believe that our freshly baked savoury products should be subject to VAT and we will be making strong representations to the Government regarding the proposed changes."

PA

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Travel Customer Service and Experience Manager

£14000 - £17000 per annum: Recruitment Genius: The fastest growing travel comp...

Recruitment Genius: Cleaner / Caretaker / Storeman

£15500 - £17680 per annum: Recruitment Genius: A position has become available...

Recruitment Genius: Head of Sales - SaaS B2B

£60000 - £120000 per annum: Recruitment Genius: This conference call startup i...

Recruitment Genius: Web Developer

£25000 - £30000 per annum: Recruitment Genius: This digital and print design a...

Day In a Page

Blairites be warned, this could be the moment Labour turns into Syriza

Andrew Grice: Inside Westminster

Blairites be warned, this could be the moment Labour turns into Syriza
HMS Victory: The mystery of Britain's worst naval disaster is finally solved - 271 years later

The mystery of Britain's worst naval disaster is finally solved - 271 years later

Exclusive: David Keys reveals the research that finally explains why HMS Victory went down with the loss of 1,100 lives
Survivors of the Nagasaki atomic bomb attack: Japan must not abandon its post-war pacifism

'I saw people so injured you couldn't tell if they were dead or alive'

Nagasaki survivors on why Japan must not abandon its post-war pacifism
Jon Stewart: The voice of Democrats who felt Obama had failed to deliver on his 'Yes We Can' slogan, and the voter he tried hardest to keep onside

The voter Obama tried hardest to keep onside

Outgoing The Daily Show host, Jon Stewart, became the voice of Democrats who felt the President had failed to deliver on his ‘Yes We Can’ slogan. Tim Walker charts the ups and downs of their 10-year relationship on screen
RuPaul interview: The drag star on being inspired by Bowie, never fitting in, and saying the first thing that comes into your head

RuPaul interview

The drag star on being inspired by Bowie, never fitting in, and saying the first thing that comes into your head
Secrets of comedy couples: What's it like when both you and your partner are stand-ups?

Secrets of comedy couples

What's it like when both you and your partner are stand-ups?
Satya Nadella: As Windows 10 is launched can he return Microsoft to its former glory?

Satya Nadella: The man to clean up for Windows?

While Microsoft's founders spend their billions, the once-invincible tech company's new boss is trying to save it
The best swimwear for men: From trunks to shorts, make a splash this summer

The best swimwear for men

From trunks to shorts, make a splash this summer
Mark Hix recipes: Our chef tries his hand at a spot of summer foraging

Mark Hix goes summer foraging

 A dinner party doesn't have to mean a trip to the supermarket
Ashes 2015: With an audacious flourish, home hero Ian Bell ends all debate

With an audacious flourish, the home hero ends all debate

Ian Bell advances to Trent Bridge next week almost as undroppable as Alastair Cook and Joe Root, a cornerstone of England's new thinking, says Kevin Garside
Aaron Ramsey interview: Wales midfielder determined to be centre of attention for Arsenal this season

Aaron Ramsey interview

Wales midfielder determined to be centre of attention for Arsenal this season
Community Shield: Arsene Wenger needs to strike first blow in rivalry with Jose Mourinho

Community Shield gives Wenger chance to strike first blow in rivalry with Mourinho

As long as the Arsenal manager's run of games without a win over his Chelsea counterpart continues it will continue to dominate the narrative around the two men
The unlikely rise of AFC Bournemouth - and what it says about English life

Unlikely rise of AFC Bournemouth

Bournemouth’s elevation to football’s top tier is one of the most improbable of recent times. But it’s illustrative of deeper and wider changes in English life
A Very British Coup, part two: New novel in pipeline as Jeremy Corbyn's rise inspires sequel

A Very British Coup, part two

New novel in pipeline as Jeremy Corbyn's rise inspires sequel
Philae lander data show comets could have brought 'building blocks of life' to Earth

Philae lander data show comets could have brought 'building blocks of life' to Earth

Icy dust layer holds organic compounds similar to those found in living organisms