​Episode 181: Unpacking VAT with Stelios & Les Howard

Stelios and Les Howard from VAT Advice dive deep into the complexities of VAT (Value Added Tax) and how it affects various industries, mainly focusing on the food sector, small businesses, and charities. The conversation begins with a casual catch-up, discussing recent travels and food experiences. Still, it quickly transitions into a more technical discussion on VAT's history, its introduction in the UK, and its evolution over time.

Les Howard shares insights from his extensive career in VAT, which started in the 1980s when VAT was doubled under Margaret Thatcher's government. He provides a fascinating look into his compliance work for HM Customs and Excise, explaining how the VAT system was shaped by post-war legislation and why the anomalies we see today exist. For example, he discusses how VAT is applied differently to various foods, such as the distinction between luxury and non-luxury items, originating from wartime measures.

Stelios and Les explore how VAT is handled in the food industry, noting the challenges faced by businesses like fish and chip shops, where the VAT system seems unfair. They touch on cases like Subway and Greggs, where VAT issues have sparked legal debates over what constitutes hot and cold food. This part of the conversation hints at food businesses' broader frustrations with VAT, especially when it feels like similar products or services are treated differently under the tax code.

The episode also covers VAT's role in the charity sector, where Les has done extensive work. He highlights how VAT can significantly create financial difficulties for charities when they cannot recover the tax on certain purchases. This segment offers an intriguing look at how non-profit organisations navigate the VAT minefield and the perceived injustices they face compared to commercial entities.

Throughout the episode, Stelios and Les consider possible reforms to the VAT system, such as moving to a more consistent approach similar to European models. They debate whether simplifying VAT for all out-of-home food businesses or even abolishing the VAT threshold would make things easier for small businesses. Les suggests a lower VAT threshold or a consistent digital tax system could remove some of the current complexities and unfairnesses.

While they don't shy away from technical details, Stelios and Les engage the conversation by grounding it in real-world examples, from chip shops to bakeries. They also discuss how governments have historically avoided VAT reform because of the challenges involved, even though a more straightforward, more logical system could benefit businesses and consumers.

In sum, the episode offers a thorough yet accessible discussion of VAT, touching on its historical background, current challenges, and potential for reform. Without revealing too much, this podcast will intrigue anyone curious about the nuances of tax law and its impact on everyday businesses, especially in the food and hospitality industries. Tune in to hear more about VAT's hidden complexities and the future of this ever-evolving tax system.