“VAT is a simple tax...” said Anthony Barber, Britain’s then Chancellor, on the introduction of Value Added Tax in the UK on 1 April 1973.
Forty-four years ago, that was probably true. VAT in the UK started off as a simple 10 per cent tax which was levied on most goods bought from a business.
However, the tax has since swollen in size and complexity, with different rates and a range of exemptions.
Brexit adds another layer of complication as VAT is a European Union legislated tax, so there are expected to be big changes to it once the UK leaves the bloc. Indeed, a main reason why Britain introduced the tax in the first place was that it was a condition of joining the European Economic Community.
The UK’s tax office – Her Majesty’s Revenue and Customs – defines VAT as “a tax that's charged on most goods and services that VAT-registered businesses provide in the UK”.
There are three rates of VAT: the standard 20 per cent; a reduced rate of 5 per cent, which applies to items such as children’s seats; and zero rate (applied to basic food items, books, newspapers, young children’s clothing, and most public transport).
There are also exempt items, including lottery tickets and stamps.
The different rates have baffled consumers for years. For example, VAT is charged at 20 per cent on gingerbread men with chocolate trousers, but if the gingerbread man is decorated with “no more than a couple of dots for the eyes”, it is exempt.
Quirks like these can cost shoppers dear, and mean businesses spend much of their time navigating an inconsistent list of exemptions.
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Read more:
Businesses have yet to register for VAT, Federal Tax Authority says
Dubai retailers fined for adding VAT to prices ahead of roll-out
Business Extra podcast: Everything we know about VAT - part 2
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Faced with mounting pressure to simplify the system, Chancellor Philip Hammond ordered a year-long investigation into the UK’s VAT rules.
The Office of Tax Simplification produced its initial report in November, which called for “a comprehensive review” of VAT.
The report admitted that what was intended as a simple tax had become “highly complex” and “has not kept pace with changes in society”.
But the work to simplify the system is still ongoing, and that means for now, British consumers still need to tell their Jaffa cakes (not taxed) from their chocolate-covered biscuits (taxed at 20 per cent).
The report was also intended to kick-start a debate about the registration threshold.
Currently, businesses in the UK must register for VAT if their taxable turnover goes over the £85,000 threshold.
While that enables many small businesses to stay out of the VAT system, it also has the negative effect of discouraging many growing firms from expanding beyond this point.
There had been fears that Mr Hammond would reduce the VAT turnover threshold in his Autumn Budget, forcing more businesses to start charging and administering the tax. But he refrained from doing so, promising to keep it at £85,000 “for the next two years”.
Mike Cherry, national chairman of the Federation of Small Businesses, told The National that the decision was “a great relief to the million or more entrepreneurs who could have been dragged into this part of the tax system – and all the extra bureaucracy which goes with it”.
Mr Cherry welcomed the initial findings of the OTS report, but said that more needed to be done to simplify the VAT system.
“Many small businesses find the VAT system very complex and time-consuming,” he said.
“A recent survey of our members found that a VAT-paying small business owner spends an average of six days a year working on the administration required for their tax documentation. This is time which could be much better spent growing their business.”
The OTS report says Brexit presents an opportunity to “clarify and simplify” areas of VAT.
What Brexit is unlikely to do, however, is result in the taxation being abolished altogether.
VAT is the second-largest source of tax revenue in Britain, after income tax. Around £124 billion of VAT was collected by HMRC in the 2016-17 tax year, representing 22 per cent of all taxes received.
That’s a revenue stream that the government won’t be bidding farewell to anytime soon.
VAT also generates far more revenue for the UK government than any other form of indirect taxation. For instance, the combined revenue from various “sin taxes”, such as alcohol and tobacco duties, came to just £20 billion in the same period.
VAT is also generally more broad-based than other forms of indirect taxation, and involves a trail of invoices that in theory helps improve tax compliance and enforcement.
However, anti-tax lobbyists argue that VAT is “regressive”, as it hits the poorest families hardest. Everyone pays the same tax rate for the same items, with no consideration of one’s ability to pay. Research has consistently proven that the less well-off pay a higher share of their income in VAT than the rich.
The so-called “tampon tax” adds another layer of controversy. The levy means women’s sanitary products are subject to 5 per cent VAT, despite being viewed by many as a basic necessity.
The issue even became embroiled with Brexit, as some Eurosceptics recommended women vote Leave in the EU referendum order to escape the tampon tax.
Finally, the Conservative government pledged to abolish the tampon tax, with the legislation to eliminate it expected to go into effect in April 2018.
Most recently, VAT has been in the spotlight as British MPs accused online giants such as Amazon and eBay of profiting from VAT evasion.
According to the UK’s National Audit Office, the government lost up to £1.5 billion last year from VAT evasion by overseas online retailers.
HMRC also came under fire for its poor record against online sellers violating VAT rules.
Mr Cherry said: “Recently concerns have been raised about VAT evasion by traders outside of the EU selling items into the UK via online market places.”
He added: “No business, wherever it is in the world, should be able to gain competitive advantage by dodging UK taxes.”
THE APPRENTICE
Director: Ali Abbasi
Starring: Sebastian Stan, Maria Bakalova, Jeremy Strong
Rating: 3/5
How to watch Ireland v Pakistan in UAE
When: The one-off Test starts on Friday, May 11
What time: Each day’s play is scheduled to start at 2pm UAE time.
TV: The match will be broadcast on OSN Sports Cricket HD. Subscribers to the channel can also stream the action live on OSN Play.
THE SIXTH SENSE
Starring: Bruce Willis, Toni Collette, Hayley Joel Osment
Director: M. Night Shyamalan
Rating: 5/5
Match info
Manchester United 1 (Van de Beek 80') Crystal Palace 3 (Townsend 7', Zaha pen 74' & 85')
Man of the match Wilfried Zaha (Crystal Palace)
Info
What: 11th edition of the Mubadala World Tennis Championship
When: December 27-29, 2018
Confirmed: men: Novak Djokovic, Rafael Nadal, Kevin Anderson, Dominic Thiem, Hyeon Chung, Karen Khachanov; women: Venus Williams
Tickets: www.ticketmaster.ae, Virgin megastores or call 800 86 823
Remaining Fixtures
Wednesday: West Indies v Scotland
Thursday: UAE v Zimbabwe
Friday: Afghanistan v Ireland
Sunday: Final
The biog
Favourite Emirati dish: Fish machboos
Favourite spice: Cumin
Family: mother, three sisters, three brothers and a two-year-old daughter
Results
5pm: Maiden (PA) Dh80,000 (Turf) 1,200m, Winner: ES Rubban, Antonio Fresu (jockey), Ibrahim Aseel (trainer)
5.30pm: Handicap (PA) Dh85,000 (T) 1,200m, Winner: Al Mobher, Sczcepan Mazur, Ibrahim Al Hadhrami
6pm: Handicap (PA) Dh80,000 (T) 2,200m, Winner: Jabalini, Tadhg O’Shea, Ibrahim Al Hadhrami
6.30pm: Wathba Stallions Cup (PA) Dh70,000 (T) 2,200m, Winner: AF Abahe, Tadgh O’Shea, Ernst Oertel
7pm: Handicap (PA) Dh85,000 (T) 1,600m, Winner: AF Makerah, Tadhg O’Shea, Ernst Oertel
7.30pm: Maiden (TB) Dh80,000 (T) 1,600m, Winner: Law Of Peace, Tadhg O’Shea, Satish Seemar
ETFs explained
Exhchange traded funds are bought and sold like shares, but operate as index-tracking funds, passively following their chosen indices, such as the S&P 500, FTSE 100 and the FTSE All World, plus a vast range of smaller exchanges and commodities, such as gold, silver, copper sugar, coffee and oil.
ETFs have zero upfront fees and annual charges as low as 0.07 per cent a year, which means you get to keep more of your returns, as actively managed funds can charge as much as 1.5 per cent a year.
There are thousands to choose from, with the five biggest providers BlackRock’s iShares range, Vanguard, State Street Global Advisors SPDR ETFs, Deutsche Bank AWM X-trackers and Invesco PowerShares.
GIANT REVIEW
Starring: Amir El-Masry, Pierce Brosnan
Director: Athale
Rating: 4/5
F1 The Movie
Starring: Brad Pitt, Damson Idris, Kerry Condon, Javier Bardem
Director: Joseph Kosinski
Rating: 4/5
Cryopreservation: A timeline
- Keyhole surgery under general anaesthetic
- Ovarian tissue surgically removed
- Tissue processed in a high-tech facility
- Tissue re-implanted at a time of the patient’s choosing
- Full hormone production regained within 4-6 months
Our legal columnist
Name: Yousef Al Bahar
Advocate at Al Bahar & Associate Advocates and Legal Consultants, established in 1994
Education: Mr Al Bahar was born in 1979 and graduated in 2008 from the Judicial Institute. He took after his father, who was one of the first Emirati lawyers
Who's who in Yemen conflict
Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government
Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
THE%C2%A0SPECS
%3Cp%3EEngine%3A%204-cylinder%202.5-litre%20%2F%202-litre%20turbo%0D%3Cbr%3EPower%3A%20188hp%20%2F%20248hp%0D%3Cbr%3ETorque%3A%20244Nm%20%2F%20370Nm%0D%3Cbr%3ETransmission%3A%207-speed%20auto%0D%3Cbr%3EOn%20sale%3A%20now%0D%3Cbr%3EPrice%3A%20From%20Dh110%2C000%0D%3C%2Fp%3E%0A
US households add $601bn of debt in 2019
American households borrowed another $601 billion (Dh2.2bn) in 2019, the largest yearly gain since 2007, just before the global financial crisis, according to February data from the New York Federal Reserve Bank.
Fuelled by rising mortgage debt as homebuyers continued to take advantage of low interest rates, the increase last year brought total household debt to a record high, surpassing the previous peak reached in 2008 just before the market crash, according to the report.
Following the 22nd straight quarter of growth, American household debt swelled to $14.15 trillion by the end of 2019, the New York Fed said in its quarterly report.
In the final three months of the year, new home loans jumped to their highest volume since the fourth quarter of 2005, while credit cards and auto loans also added to the increase.
The bad debt load is taking its toll on some households, and the New York Fed warned that more and more credit card borrowers — particularly young people — were falling behind on their payments.
"Younger borrowers, who are disproportionately likely to have credit cards and student loans as their primary form of debt, struggle more than others with on-time repayment," New York Fed researchers said.
COMPANY%20PROFILE
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RIVER%20SPIRIT
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Electric scooters: some rules to remember
- Riders must be 14-years-old or over
- Wear a protective helmet
- Park the electric scooter in designated parking lots (if any)
- Do not leave electric scooter in locations that obstruct traffic or pedestrians
- Solo riders only, no passengers allowed
- Do not drive outside designated lanes
Dust and sand storms compared
Sand storm
- Particle size: Larger, heavier sand grains
- Visibility: Often dramatic with thick "walls" of sand
- Duration: Short-lived, typically localised
- Travel distance: Limited
- Source: Open desert areas with strong winds
Dust storm
- Particle size: Much finer, lightweight particles
- Visibility: Hazy skies but less intense
- Duration: Can linger for days
- Travel distance: Long-range, up to thousands of kilometres
- Source: Can be carried from distant regions
How to avoid crypto fraud
- Use unique usernames and passwords while enabling multi-factor authentication.
- Use an offline private key, a physical device that requires manual activation, whenever you access your wallet.
- Avoid suspicious social media ads promoting fraudulent schemes.
- Only invest in crypto projects that you fully understand.
- Critically assess whether a project’s promises or returns seem too good to be true.
- Only use reputable platforms that have a track record of strong regulatory compliance.
- Store funds in hardware wallets as opposed to online exchanges.
SCORES IN BRIEF
Lahore Qalandars 186 for 4 in 19.4 overs
(Sohail 100,Phil Salt 37 not out, Bilal Irshad 30, Josh Poysden 2-26)
bt Yorkshire Vikings 184 for 5 in 20 overs
(Jonathan Tattersall 36, Harry Brook 37, Gary Ballance 33, Adam Lyth 32, Shaheen Afridi 2-36).
More from Neighbourhood Watch
Tamkeen's offering
- Option 1: 70% in year 1, 50% in year 2, 30% in year 3
- Option 2: 50% across three years
- Option 3: 30% across five years
