VAT: Very Absurd Tax?
When a chocolate-covered cake can be zero-rated, but your child’s education can’t.
By Nick Faulkner
There are many things in life I don’t claim to fully understand: quantum physics, Love Island, and why estate agents still insist on the phrase “deceptively spacious” to name just a few. But high on the list and, unlike the others, actually affecting most of us, is the British VAT system.
It’s a tax that manages to be simultaneously all-encompassing and entirely arbitrary.
And while that might sound like the start of a budget speech, it’s also the reason I ended up in a recent discussion that veered from private school fees to Jaffa Cakes, duty-free fags and children's shoes – only some of which qualify for VAT exemptions.
So let’s dive in. Because if we don’t laugh, we’ll cry. And if we don’t question it, who will?
Charities, Choices and the Classroom
The Labour Party has, as promised, started charging VAT on private school fees. The justification is simple: most people who send their children to private schools are wealthy, and the schools themselves shouldn’t benefit from charitable status. Many people who know me might be surprised to read that I don’t actually have a problem with that. Education, after all, may not be considered inherently a charitable endeavour. But then you hit a wall of logic.
If teaching five-year-olds isn't “charitable,” why is it charitable to educate twenty-year-olds at university? Why should Eton lose its VAT exemption while Oxford keeps it?
If therefore different types of education can be considered charitable and others not, why not apply that logic to say health care? So why don’t we decide that breast cancer is a legitimate healthcare cause but prostate cancer isn’t. I don’t think it’s fair to cherry-pick what counts as charitable based on political expediency or polling.
The Marbella Paradox
Here’s another gem: the idea that wealth equals tax liability. Which after all is at the very heart of wealth distribution, and therefore every tax system in the world. “You can afford private school, so you can afford the VAT.” Fine. But what about the people boarding flights to Marbella?
If you can afford a two-week holiday, surely you can afford to pay tax on your bottle of Scotch and your 200 Marlboro Lights. But no! One strolls through duty free and you’re buying luxuries with no tax. Zero VAT. No duty.
So why not close that loophole, too? If the test is affordability, shouldn’t we apply it consistently?
The Case of the Jaffa Cake
You already know about this one. The one that made it to court.
In the 1990s, HMRC decided that Jaffa Cakes, being chocolate-covered, were technically biscuits, and therefore should be subject to VAT. McVitie’s disagreed. Vehemently. And after much legal wrangling (and presumably a great deal of snacking in the judge’s chambers), they won.
The court ruled that Jaffa Cakes are (as I would argue the name makes clear!) cakes, not biscuits. And since you don’t pay VAT on cake, McVitie’s walked away with a tax-free spongey centre.
The logic? Cakes go hard when stale. Biscuits go soft. Jaffa Cakes go hard. Ergo: cake.
Yes, our tax system is based on the shelf life of baked snacks. This is Britain after all!
Big Kids and Small Shoes
One of VAT’s stranger quirks is the exemption for children’s clothing and shoes. Sounds fair. But what defines a “child,” in VAT terms? Not age — but size.
A friend of mine grew to be 6′11″, at the age of 12 he was already well over 6’. His school uniform cost a fortune. All adult sizes. All full VAT. Meanwhile, I know adults under five and a half foot who happily pick up jeans in the kids’ section — VAT-free.
For example, I know someone, who often buys her trainers from the children's range. She's a size three. Guess what? No VAT.
So, two people. Same shops. Same products. One pays tax. One doesn’t. Not based on income, or need, or fairness, or even age (which is good, since that would be discriminatory!) – just on foot size.
Final Thoughts
I’m not suggesting we scrap VAT. It funds essential services. But I am suggesting we scrap the illusion that it’s fair, or coherent, or even remotely modern.
Because if a tax system can’t tell the difference between a biscuit and a cake – maybe it’s time we baked in some changes. What do you think?