From tampons to ebooks: the strangest things we do and don't pay VAT on in the UK

We shouldn’t have to pay VAT on these goods and services!

In the UK Value Added Tax (VAT) has applied to the price of certain goods and services we purchase since 1973.

Currently there are three rates of VAT. The standard rate is 20% and applies to most goods and services, but there is also a reduced rate of 5% as well as a zero rate.

Some goods and services are ‘exempt’ or outside the scope of VAT such as postage stamps, property transactions, insurance and financial transactions.

Given the wide range and complexity of the system there are many weird quirks and mind-boggling anomalies, which have led to a number of high-profile dramas.

Here are a few of the weirdest and outrageous things we get charged VAT on in the UK.

Tampons

Sanitary protection products like tampons and maternity pads are, incredibly, classed as non-essential ‘luxury’ items in the UK.

In the past this meant the items attracted the standard rate of VAT. But in 2000 Labour MP Dawn Primarolo managed to get the Government to bring this down to the reduced rate of 5% instead.

However, campaigners say this ‘tax on women’ should be abolished entirely. A petition calling for a change in the law has gained more than 250,000 signatures.

But under EU law the UK can’t simply apply a zero rating. The Government says any change would require a European Commission proposal and agreement from all 28 member states.

e-books

Publications like books, newspapers and magazines are exempt from VAT. But oddly digital e-books attract the full standard rate in the UK and the rest of the EU.

EU regulations says different VAT rules apply to paper and digital books as the supply of text by electronic transmission counts as a digital service rather than a cultural item.

France and Luxembourg challenged this policy in 2012 and lowered the taxes collected on e-book but were subsequently challenged by the European Commission. In 2015 the European Court of Justice ruled that the lower taxes were illegal and had to be raised.

But the fight continues with French publishers launching a campaign encouraging people to tweet the European Commission (@EU_Commission) about what is a book and what isn’t using the hashtags #ThatIsNotABook and #ThatIsABook.

Biscuits covered in chocolate

Under UK VAT rules bakery products like bread, biscuits and cakes are essential items and so are zero-rated.

But biscuits that are wholly or partly covered in chocolate are classed as confectionery and therefore deemed as a standard rated luxury item. Weirdly cakes with a similar make-up aren’t.

This peculiarity of UK tax law has led to fierce battles between businesses and HMRC, most famously in 1991 with the Jaffa Cakes case.

HMRC argued that because of their shape and size and because people generally ate them as biscuits Jaffa Cakes should be standard-rated. But McVities, the makers of Jaffa Cakes, insisted they were simply small cakes and should be zero-rated.

The case went all the way to a tribunal, which ultimately ruled in favour of McVities.

Children’s car seats

The Government charges a reduced rate of 5% VAT on children’s car seats and travel systems.

This applies to items like safety seats, booster seats, booster cushions and carrycots with restraint straps that might be part of a pram system.

But it seems odd that this protective equipment, required by law for children up to the age of 12 or 135cm tall, attracts any VAT at all.

There have been various campaigns, most recently led by retailer Halfords, calling for children’s protective equipment to be zero-rated like children’s clothing.

Potato crisps

Another weird quirk in the UK’s VAT rules is that potato snacks are subject to standard rate VAT, but maize and corn-based snacks are zero-rated.

The peculiarities of this rule led to a high profile battle between Pringles manufacturer Procter & Gamble and HMRC.

In 2008 a High Court judge ruled that the unusual packaging shape and the fact that potato content was less than 50% meant that Pringles should be exempt from VAT.

But the firm ended up owing tens of millions of pounds after the Court of Appeal ruled in favour of the taxman that Pringles were in fact a potato snack.

Double glazing

The government offers a reduced rate of VAT for certain energy-saving installations.

This applies to measures such as insulation, solar panels, wind turbines, wood-fuelled boilers and air-source heat pumps set up in your home.

But weirdly the installation of secondary or double glazing does not qualify for the reduced rate, even though it is one of the most effective ways to improve energy efficiency in properties.

The reduced rate also doesn’t apply to installing an energy-efficient condensing gas boiler or when you buy and fit energy-saving gadgets yourself.

De-shelled nuts

Roasted or salted nuts sold with their shells on, like monkey nuts and pistachios, are zero-rated for VAT.

But strangely all other roasted or salted nuts that have been de-shelled are subject to VAT at the standard rate.

You can beat this bizarre tax by going for a mixed assortment. HMRC says mixed bags containing products containing only a small quantity of standard-rated nuts may be treated as zero-rated.

It states this applies for: “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.”

Gas and electricity

In the UK water bills are standard rated, but gas and electricity for residential domestic use attracts the reduced 5% VAT rate.

Considering energy is an essential utility for homes and the Government has pledged to reduce fuel bills it would be a huge help for cash-strapped households if this was scrapped entirely.

According to the latest figures from the DECC, the average housed pays £1,344 a year for their gas and electricity. So scrapping the tax would save around £67.

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Ice cream

Frozen foods are zero-rated in the UK. But ice cream, frozen yoghurt, ice lollies and sorbets are subject to standard rate VAT.

HMRC says this is because these types of foods are designed to be eaten while frozen, while the zero-rated category only applies to foods that have to be cooked before they can be eaten or have to be thawed completely before being consumed.

Hot takeaways

Cold takeaway food and drink is zero-rated for VAT, while hot takeaway food and drink is subject to standard rate VAT.

Hot takeaways have VAT applied if the food is hot at the time it is provided and one or more of the following five tests is satisfied.

• It has been heated for the purposes of enabling it to be consumed hot.
• It has been heated to order.
• It has been kept hot after being heated.
• It is provided to a customer in packaging that retains heat or in any other packaging that is specifically designed for hot food.
• It is advertised or marketed in a way that indicates that it is supplied hot.

So warm pasties and sausage rolls that have been baked and are in the process of cooling down are zero-rated. But a toasted sandwich is subject to VAT.

George Osborne tried to simplify the rules in the 2012 Budget so all hot takeaway food “which is at a temperature above the ambient air temperature at the time that it is provided to the customer” was standard rated.

This led to uproar as items like Cornish pasties and sausage rolls would be taxed. High street bakery chain Greggs delivered a petition to Downing Street that half a million people had signed opposing the plans and eventually the Government backed down.

Mobility aids for the elderly

At the moment ill and disabled people don’t pay VAT on mobility aid installations.

But over 60s that need mobility aids installed in their homes have to pay 5% on the work and supply.

The tax applies to things like grab rails, ramps, stair lifts, bath lifts, built in shower seats and walk-in baths with sealable doors.

Given the cost of these improvements to help people get around or live more comfortably it seems an unfair tax.

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