Brexit New Deal/Legal Changes - Risk Still Remains

[Saracen999]

Its just more lies from ukip. Its never been an eu tax nor is it only european countries that have vat. Ukip and other leave based groups have told soo many lies about brexit and that it feels like brexiteers have this in general have an unreal expectation of whats going to happen post brexit.

Actually, it is an EU tax. The UK joined the EU, or the EEC as it wzs then, at the start of 1973 and that required replacing our previous P.o.S tax, Purchase Tax, with VAT, several months later.

It has since become very widely adopted and most advanced economies (major exception being the US) now use it in one form or another.

The other sense in which it is an EU tax is that member VAT laws are mandated by EU directive, and provide some common frameworks, like a minimum standard rate of 15%, and unless (like the UK) exemotions were agreed as part of our accession, what products are not subject to standard rate. The EU doesn't control all VAT rules, but they do mandate a lot of it.

Still, that UKIP claim is still moronic.

[peterb]

The other sense in which it is an EU tax is that member VAT laws are mandated by EU directive, and provide some common frameworks, like a minimum standard rate of 15%, and unless (like the UK) exemotions were agreed as part of our accession, what products are not subject to standard rate. The EU doesn't control all VAT rules, but they do mandate a lot of it.

Still, that UKIP claim is still moronic.

And that is one reason why the UK can't reduce VAT on Gas/Electricity etc - the only thing they can do is increase it - and once increased, it cannot be reduced.

Some may think that increasing VAT on heating fuel is a good thing - but the point is that it is another instance of where the UK Govt cannot legislate as it thinks best for UK citizens.

[TooNice]

I can't see why any "cross-party" talks should take more than a few days. For ANY chance of an agreement between May's position and the officisl Labour position (if we can work out what that is, since it varies according to who is describing it) is going to require a LOT of compromise by May, or Corbyn, or both. If they are going to, it shouldn't take more than a few days, and if they aren't, it shouldn't take even that long.

Not that I disagree, but we have seen how good our government/politicians are at coming with a decision. Even if we do not concern ourselves with what Tusk (and Council members) would like, an extension that can be cut short at any time has no real disadvantage given that we've already shown that the pressure of a deadline doesn't result in decision being made anyway..
Personally, I think it is pretty embarrassing that we haven't been able to come up to an answer within the deadline, seemingly twice, and it would be nice not ending up in the same situation again within a fairly short period of time.

Now I know that some brexiters might celebrate the possibility of an accidental no-deal, or a veto from one of the EU countries forcing us into a no-deal between any extension request, but I would say that if no-deal happens not on our term, but because we messed up, then it would show even more incompetency on our end to the world. Though I suppose at this point we are scrapping so far into the bottom of the barrel that perhaps it doesn't matter (it's pretty much how I feel about the prospect of a second referendum being "divisive" - as I see it, it can't be worse).

[matts-uk]

Scrapping VAT you mean?

That is truly moronic.

Completely agree. The £350M a week to the NHS claim was on the border of what can be described as illustrative. The UKIP claims about VAT are blatantly misleading.

First, it's a tier-1 tax-raising measure that pays for a huge chunk of our public services.

Second, it wouldn't put 20% back in most people's pockets anyway, especially the poorest, precisely because the poorer you are, the higher proportion of your spending is either exempt or zero-rated, and even energy bills are 5%, not 20%.

Yes and no.

https://www.taxpolicycenter.org/brie...ear-burden-vat
"Because lower-income households spend a greater share of their income on consumption than higher-income households do, the burden of VAT is regressive when measured as a share of current income: the tax burden as a share of income is highest for low-income households and falls sharply as household income rises."

Speaking from recent experience, my biggest bug-bear with the 20% VAT rate is the hurdle it creates in the path of expanding a small business deriving revenues from services. With regard for local services that are bounded by the number of hours a tradesman can work, with minimum wage around the £10 mark + VAT raises it to £12. The recent imposition of Digital VAT has raised my accountancy fees significantly too, making the actual cost of VAT to domestic customers and charities somewhat greater than 20%.

Several years ago, I analysed my supermarket bills for several months, and on my entire food expenditure, VAT accounted to around 1% to 1.5% and even that was because of "luxuries" I could do without. Most clothing is zero-rated too.

If you live life like it's 1950, perhaps it is possible to buy the essentials while avoiding VAT. Although to be fair it was Sales Tax back then with a variety of rates up to 33%. It isn't 1950 any more! The list of zero rated goods looks increasingly anachronistic with the piece meal complexity of VAT application making it near impossible to guess. Indeed, most adult clothing is subject to VAT but some PPE is zero rated.

Where it would reduce prices is on things like cameras, computers, etc - mainly duscretionary spending, and even then, government would simply have to raise tax elsewhere.

If you expect to function in the 21st century VAT can hardly be described as discretionary. I am not entirely against VAT but 1/5, £20 in every £100 is way too much. I was ranting only the other day that a 1% increase to income tax is accompanied by a media outcry but 20% VAT hardly raises an eyebrow.

As far as I can see, the government could raise far more tax by doing two things;
1. Create a hostile environment for the tax planning industry.
2. Persuade large corporations to pay less of their profits to share-holders and more (than minimum wage) to the lower end of the workforce.

A large number of people earning a little more should return more tax to the treasury than a wealthy minority earning a lot more and being adept at reducing their tax burden.

There are good reasons to leave the EU. That isn't one of them.

The EU takes a percentage of VAT, which the EU describe as 'own income.' It seems to me, more accurate to describe it as an EU TAX collected by private business in member states. To be perfectly honest I am not that bothered about EU contributions - It is small change compared to the trade figures. Personally, I would have been happy for the UK to increase contributions in exchange for some special dispensation on EU freedom of movement.

In a post Brexit UK, it is likely to be the small business sector that capitalises first on any new opportunities. A hefty reduction in VAT would encourage the liquidity (spending) small business depends on. I don't hold out much hope as successive governments have spent far too much time listening to CBI lobbyists.

[matts-uk]

Even if we do not concern ourselves with what Tusk (and Council members) would like, an extension that can be cut short at any time has no real disadvantage given that we've already shown that the pressure of a deadline doesn't result in decision being made anyway..

The disadvantage is that all the time Parliament dithers, business is haemorrhaging investment. Parliament needs to make a decision. In or out. The limbo we are enduring is eroding business and consumer confidence. I believe the economy is strong enough to weather Brexit but there is a danger that confidence sinks so low, we go over a tipping point and into recession for another generation.

[Saracen999]

@Matts-uk

You can find articles claiming VAT is regressive, but you can also find them saying it isn't, because the poorer you are, the greater proportion of your spending goes on zero-rated (or sometimes, but much less often, exempt) goods. I agree with that latter view.

And no, I don't live my life like it's the 1950s. If you see any of my comments of cooking, you'll notice an emphasis on, for instance, quality ingredients, including meats from a very good butcher and veg from a local veg shop, or markets.

But even with most supermarkets, you'll find a close examination of the receipts identify which goods are VATable, such as with a V bedide them. That is what I analysed, for every item over several months and the result was as I said.

As for the impact on small businesses, there's only one real situation where VAT should impact and that's when a non-registered business is competing against a registered business selling to end consumers, because the registered business gets his input taxes back and VAT is only paid on the value added in the final stage.

As for you accountancy costs, do you own VAT. I did, for 30+ years, having registered jn 1984.

Living life in the 21st century doesn't mean you have to change camers, computer, phone etc every time a new model comes out. You might want shiny new news, but you do not need them ... unless it's your business, in which case, register and get the VAT back.

[TooNice]

The disadvantage is that all the time Parliament dithers, business is haemorrhaging investment. Parliament needs to make a decision. In or out. The limbo we are enduring is eroding business and consumer confidence. I believe the economy is strong enough to weather Brexit but there is a danger that confidence sinks so low, we go over a tipping point and into recession for another generation.

While I agree with that too, our government and parliament have already shown that the pressure of two deadlines isn't enough to come to a timely decision. Doesn't inspire much confidence that another short deadline will be enough. But if they -do- somehow come up with a breakthrough early, then the flexibility of the extension can just be exercised to move onto the next stage without waiting to the end of that period. And if they somehow -still- fail to come up with a solution.. well, it's not like they would've come up with a solution on June 30th anyway, and we at least will only have to demonstrate our incompetence once within a 12 months period, instead of multiple times within that period.

There is also the question if *any* cross-party agreement rushed through the parliament is better than one that is less rushed (at the cost of a longer limbo).. though that of course, depends on what kind of deal they come up with, which at this point, we still have no idea.

(And this is not even about what *I* would like, I doubt a deal between Tory and Labour would be one that would suit me, but even resigning to the fact that brexit will likely suck for me, if they are going to take their sweet time in the end, they might as well take the flexible extension and get it sort it as quickly as they can however fast that ends up being.

[matts-uk]

@Matts-uk

You can find articles claiming VAT is regressive, but you can also find them saying it isn't, because the poorer you are, the greater proportion of your spending goes on zero-rated (or sometimes, but much less often, exempt) goods.

It is a long time since I did my economic exams so I thought I would go looking. The international consensus formed around the analysis of historical data appears to be as it always was; taxes on consumption are regressive as are most indirect taxes.

I did find articles claiming VAT was progressive but they were opinion pieces, prefixed by words like "believe" and "intuition" before going on to describe a somewhat convoluted "whole life" forecast. Those articles were penned by politicians around 2011, notably Osbourne, defending the hike on VAT as an austerity measure, and parroted by Lib-Dems in coalition at the time. At the root of the claim appears to be a piece by the IFS published around the same time. The IFS is not generally untrustworthy but they are funded by the government and EU, and were regularly cited by Project Fear as I recall. In this case, opining that VAT might be progressive despite a multitude of studies concluding otherwise, the IFS analysis, forecast and the opinions that flow from it, have been criticised for ignoring real world data gathered by the ONS (amongst others).

And no, I don't live my life like it's the 1950s. If you see any of my comments of cooking, you'll notice an emphasis on, for instance, quality ingredients, including meats from a very good butcher and veg from a local veg shop, or markets.

Apologies, I should have been clearer. Analysing supermarket receipts is not a fair representation of the VAT burden - The majority of unprepared foods are zero rated. The proportion of earnings spent on food by UK households on average is under 10% however. The reference to the 1950s was merely to evoke consideration for what is considered essential over an evolving and dramatically changed lifestyle.

The list of zero rated VAT supplies was inherited from Sales Tax when the UK joined the EEC in 1973, on condition existing supplies 'remained as they were applied.' i.e. No changes and no new zero rate supplies. This further undermines the IFS/Osbourne opinion. The list of zero rates is a snapshot of what the poor were buying prior to 1973, that becomes increasingly anachronistic as time goes by. For instance; Printed newspapers, 0%. Electronic newspapers, 20%. Victoria sponge cake, 0%. Chocolate glaze cake, 20%. Jaffa Cake, 0%. Drinking water, 0%. Bottled water, 20%. Tap water served hot, 20%. Bag of pistachios, 0%. Bag of peanuts, 20%...And so on.

As for the impact on small businesses, there's only one real situation where VAT should impact and that's when a non-registered business is competing against a registered business selling to end consumers, because the registered business gets his input taxes back and VAT is only paid on the value added in the final stage.

I do not know whether it was ever the case of exempt Vs registered competition but such a demarcation is nothing I recognise today. Small businesses serving local consumers compete on price and service and do not have the luxury of picking their competitors. To grow beyond a successful, over-worked, one-man-band, I need to serve local consumers, exempt charities and VAT registered businesses alike, at a price that appears competitive to all.

It is the rate of VAT I am objecting to, by the way. 10% wouldn't worry me, 5% from margin, 5% price hike, should be bearable until the business capitalises on economy of scale. An immediate 1/5 step reduction of sales revenue however, I would say that is a 'sphincter winking' amount to find from existing headroom. It comes around the same time as more staff, larger premises, more admin all work together to increase turnover and lower margin overall.

As for you accountancy costs, do you own VAT. I did, for 30+ years, having registered jn 1984.

The very first computer program I turned out to a written requirement was a BASIC app, on a VIC20 as a teenager, to help my father with his VAT. I was myself VAT registered from 1995 to 2015 and it was easy enough. I de-registered when I re-invented the business and re-registered a couple months ago after taking on staff.

It is not VAT per-se that is the challenge but Digital VAT in particular. Perhaps you have seen Peter Jones on TV touting Sage, maybe heard the ads for Quick Books and Xero on the radio. Niche software advertised in prime time! HMRC have put small businesses over an 'approved' accountancy software barrel. I can not do my own VAT any more. I can not write my own software either as HMRC only accept submission from the packages they have approved. The upshot is I am facing increased software costs, training costs, book-keeping and accountancy overheads that I really could do without at this critical point in the business' growth.

Living life in the 21st century doesn't mean you have to change camers, computer, phone etc every time a new model comes out. You might want shiny new news, but you do not need them ... unless it's your business, in which case, register and get the VAT back.

You miss the point/s. If you want to function in the 21st century you will need to replace your computer, your mobile Etc, when they break beyond repair, become obsolete, or simply wear out. However, I am not selling or making stuff. I can not make more widgets or sell more stuff, for similar cost.

I am selling a trade; time and expertise. My minimum cost price, an hours work in the UK, is ultimately set by the UK government. In the current climate I imagine most employees asking for a 20% pay rise would get laughed at but that is essentially what the government asks of trades when they reach the threshold for VAT.

[Saracen999]

I don't want to get into an argument over tbe niceties of VAT, but some of what you say there misrepresents what I said. For instance, I didn't say analysing supernarket bills was representative, I said that the poorer the consumer, the proportion of VATable goods in their purchases decreases, partly because most foodstuffs are zero-rated, and as an example I checked my food purchases over a protracted period and VAT was minimal. As food purchases account for a greater proportion of income of lower paid tgan higher paid, VAT impacts them less. On the other hand, the higher your disposable income, after rent/mortgage, food and other esssentials, the more you will spend on computers, phones, etc, and hence, the more VAT you will pay. My point was about regressive/progressive.

Similarly, the only time VAT impacts customers is if they can't claim it back. If all your customers are consumers then being VAT registered puts your prices up but even then, it only causes a differential if your competitors aren't. Small business don't have to register until their turnover exceeds or is expected to exceed the threshold, but they can opt to do so. I did, in my early days, because ALL my customers were VAT-registered and didn't care if I charged VAT as the reclaimed tax on inputs but if I wasn't registeded, I couldn't claim VAT on my inputs, thus hitting my bottom line,

That VAT impacts on small business is not in dispute, but the way it impacts varies, and in my case I was better off registering. It was also not my point.

[Top_gun]

The Tories, not the EU, are responsible for VAT on domestic fuel

"There is one man amongst the ranks of the Brexiters who knows all about VAT on domestic fuel. That’s right. Step forward former Chancellor Norman Lamont. It was he who decided to put VAT on domestic fuel at the rate of 8% from April 1 1994. The EU didn’t force him to do this. He was doing it to cut public spending, something Tories have a bit of an obsession with. Not only that, but he would have been quite happy to raise it to 17.5% the year after."

Typical Tories using the blame game. In this case it is the EU.

I suspect VAT is either going to remain the same or much higher post Brexit. How else will a future government will plug its finance during a failing economy?

[Zak33]

"VAT on Food"

Food and drink, animals, animal feed, plants and seeds

Food and drink for human consumption is usually zero-rated but some items are always standard-rated. These include catering, alcoholic drinks, confectionery, crisps and savoury snacks, hot food, sports drinks, hot takeaways, ice cream, soft drinks and mineral water.

Restaurants must always charge VAT on everything eaten either on their premises or in communal areas designated for their customers to use, such as shared tables in a shopping centre or airport food courts.

In addition, restaurants and takeaway vendors must charge VAT on all hot takeaways and home deliveries, but don’t need to charge VAT on cold takeaway food unless it’s to be eaten in a designated area.

https://www.gov.uk/guidance/rates-of...ants-and-seeds

I'd say VAT is zero on feeding a family healthily from any shop in the UK.

[Saracen999]

"VAT on Food"

https://www.gov.uk/guidance/rates-of...ants-and-seeds

I'd say VAT is zero on feeding a family healthily from any shop in the UK.

Yup.

You do have to be a bit careful as there are some oddities that might catch you out, but essentially, yes.

Probably the most famous example was the Jaffa Cake argument as IIRC, if it was a biscuit it was zero-rated but if it was a cake it was standard-rated. That spent years in the courts and IIRC, ended up classified as zero-rated biscuit despite being called a cake.

But regardless, if you stick to normal foods bread, meat, veg, etc, it's zero-rated and, of course, such items either are or should be at the heart of the tood budget for someone trying to feed a family on minimum income. Whether they actually do or not is another issue.

[Ttaskmaster]

Probably the most famous example was the Jaffa Cake argument as IIRC, if it was a biscuit it was zero-rated but if it was a cake it was standard-rated. That spent years in the courts and IIRC, ended up classified as zero-rated biscuit despite being called a cake.

IIRC, it was the other way around. McVitties took great pains to prove it was a cake (which goes hard when stale), rather than a biscuit (which goes soft when stale) and thus exempt from taxation.

Edit: I could have just posted this: https://en.wikipedia.org/wiki/Jaffa_Cakes#Taxation

[OilSheikh]

So, an incompetent Prime minister , an incompetent government and cabinet keeps bending over to the EU and Brexit keeps getting delayed.

We have truly become shameless as a nation.

[outwar6010]

https://metro.co.uk/2019/05/07/boris...-lies-9430673/

[TeePee]

https://metro.co.uk/2019/05/07/boris...-lies-9430673/

I like the idea.. But if politicians aren't allowed to lie, how will they communicate with anyone?