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VAT case takes the biscuit

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6th Jan 2006
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By Nichola Ross Martin

Despite the Government's attempts to reduce the burdens of red tape for business, there is one area of tax, namely VAT, where all the tape cutting in the world is unlikely to have any impact.

VAT rules produce legendary results in their sheer bizareness and complexity. A recent decision at a VAT tribunal ensures that this indirect tax will continue to befuddle practioners and their clients alike.

The case involved United Biscuits, which was attempting to argue, as Proctor and Gamble had successfully done on a previous occasion, that its dipping crisps constituted food for VAT purposes. The tribunal found that McCoy's Dips, unlike Pringle's Dippers did not!

Food is zero-rated for VAT purposes, whilsts snacks are in many cases standard-rated. Snacks are defined as potato crisps, potato sticks, potato puffs, and savoury products obtained by the swelling of cereals or cereal products; and salted or roasted nuts.

United Biscuits argued that its product requires an element of preparation and should therefore be classified as a food.

But chairman of the tribunal Colin Bishopp threw out United Biscuit's appeal.. He was quoted in The Telegraph as saying: "We are satisfied that dipping a crisp into a pot of salsa cannot amount to preparation in any normal sense of the word."

Paddy Behan, VAT partner at Grant Thornton, said United Biscuits had been unlucky: "There are elements of Greek tragedy about this farce because the case turns on the meaning of the word 'preparation."

HMRC defended its pursuit of the case, which involved £100,000 worth of tax - 'small fry' if considered in the light of its departmental accounts: "We have to pursue cases to safeguard revenues, even if they seem like a small amount of money," it said.

http:www.rossmartin.co.uk

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By baseline
09th Jan 2006 18:22

WHO Cares?
Is there a correlation between VAT and Fat?

If there is, then we could help the Health Service and ourselves by letting the customer know that the food has VAT content on the price label.

Of course, it would be blatent tax evasion, and could lead to the supermarket directors being prosecuted after their accountants snitch on them.

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