Whilst Conservatives and Labour have promised not to raise the level of VAT, nothing has been said on adding VAT to a whole new range of goods and services currently exempt from VAT in a post-Brexit era when they are no longer bound by EU law.
Alan Peace, VAT Partner at Blick Rothenberg, said: “Labour, and now the Conservatives, have pledged not to increase the rate (or level) of VAT for the next five years, but this relates to the headline rate at 20%.
“Nothing has been said about not extending the scope of this tax by adding VAT to things that are currently zero rated (VAT free), such as most foodstuffs, children’s clothing, transport, books and newspapers. Neither main party has clarified whether their promise extends to these areas.”
He added: “Within two years, the UK will leave the EU. This means that, whichever party is in power, it would be free to add VAT on a whole new range of goods and services that are currently protected under EU law. These ‘exemptions’ currently include most financial services and insurance premiums, private education, private healthcare and many activities undertaken by not-for-profit organisations.
“If the Government of the day needs to raise more taxes before the end of its 5 years in office, extending the scope of VAT might be too tempting while still being able to argue that they haven’t raised the basic rate of VAT!”
For more information please contact Alan Pearce.