Zero rating on food – unexpected results

The idea that there should be logical guiding principles underlying tax legislation is compelling but a fair amount of VAT defies explanation. On the rare occasions that the tax is discussed in the newspapers commentators often try to impose a rational basis onto the UK’s system of zero rates: ‘luxuries are charged to VAT and the necessities of life are not’. That has some attraction as an idea but it has no basis in law. Arguments about VAT liability are all about the borderlines between different categories and those borderlines are defined in the legislation. The VAT Act does not mention the words – or concepts – of ‘luxury’ and ‘necessity’.

Frozen in time

I will go through some of the rules and cases about food as a good example of an area where the law could usefully be ripped up and started again in...