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8 January 2012
Under new proposals published by the European Commission (EC) in Brussels in December, UK households could lose up to £553 per annum as the VAT rate on food is raised from 0% to a maximum 20%.
Simplifications of EU VAT exemptions
The EC’s White Paper, issued on the 6 December, on the overhaul of the EU-wide VAT system, is aimed at simplifying the tax regime’s reporting burden for businesses, and cutting billions of Euro’s lost ever year to fraud. However, the EC is also looking to eliminate many reduced VAT rate exemptions in an attempt to impose a harmonised fiscal regime across all 27 member states, and help countries consolidate their financial position in the face of the current Euro crisis.
For the UK, this means its cherished zero VAT rating of food and other goods, e.g. books and newspapers, could be lost. Instead, it would be forced to raise the VAT rates on household food spend to potentially the maximum standard VAT rate of 20%. Below is a sample list of EU VAT rates on foodstuffs:
Country VAT charge on food
UK 0%
France 19.6%
Germany 19%
Spain 13%
Belgium 20%
Sources: Europa Website
The latest Office of National Statistics’ Family Spending report shows that the average household weekly expenditure on food and non-alcoholic drink averaged £53.20 a week. Setting the VAT rate on such expenditure to 20% would cost households £553 per year.
Poland was last month forced by the EU to raise its VAT rate on childrens’ clothing from 8% to 23%.
Richard Asquith, Head of VAT, TMF Group commented:
”Currently, the UK is the only country in the EU that does not levy VAT on all foodstuffs - Ireland and Malta are close. The rational behind this exemption is that the less well off, who spend a larger proportion of their incomes on food, would be disproportionably hit.”
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