Happy 50th Birthday to Value Added Tax

The much loved Value Added Tax celebrates its 50th birthday on 1 March 2023. It was introduced in March 1973, replacing Purchase Tax, which was charged on wholesale, not retail sales. Standard rates started at 8% but a higher rate of 25% applied to petrol and some luxuries in the 1970’s. The current 20% standard rate was introduced in 2011.  The compulsory VAT registration threshold was £ 5,000 of taxable turnover per year and is now £ 85,000. VAT generated government revenue of £ 4.5 billion in 1973 (7% of total revenue), whilst last year it collected over £ 156 billion, 17% of revenue.

Other key changes include:

1. The administration of the tax moving from HM Customs & Excise to the merged HM Revenue & Customs
2. The closure of all Local VAT Offices
3. The block on VAT recovery of the purchase of cars
4. The horse racing scheme, which acknowledged that racing horses was a business, not a hobby
5. Leaving the EU
6. Making Tax Digital
7. Infamous tribunal cases on Jaffa cakes and pasties
8. MTIC carousel fraud, on the wholesale of mobile phones, which cost the UK an estimated £ 10 billion

For more information, please get in touch with our VAT team.