How to make your shopping list VAT-free

Despite descenting comments condemning the 2.5% hike in Vat as regressive I've always thought the opposite, believing it a fairer alternative to hiking basic rate Tax and/or National Insurance rates as the less well off can avoid paying it on necessities.

This submission by Rosie Murray-West and Kara Gammell on Telegraph.co.uk seems to support that view:

If you're worried about the impact of the increase in value added tax (VAT) to 20pc in this Budget, you're not alone. According to shopping comparison website mySupermarket.co.uk, the tax will add an annual average of £33 to each supermarket shopper's basket when it comes in on January 4. For many families reliant on convenience foods, the cost will be far higher.
That's before you even start looking at the extra costs of petrol, clothes, cars, whitegoods and services. Fortunately for the shopping-savvy, there are ways you can beat the tax rise. That's because VAT is a tax of complications and anomalies, and it's possible to cut it out of a substantial part of your shopping basket.

More than 40pc of shoppers will change their spending habits in response to an increase in VAT, according to research by accounting and business services group RSM Tenon.
If you know what is and is not subject to VAT, then you'll be able to adjust your shopping accordingly.
VAT law is supposed to split your supermarket shop between two categories; essential foods, which are zero-rated so that you don't pay any tax, and luxury foods that will be subject to a 20pc tax.
However, because of the difficulty of deciding what constitutes a luxury item, it's possible to buy very similar products at 20pc less than others because they are VAT-free.
Daniel Lyons, VAT partner at accountancy firm Deloitte, said that VAT law was "like French irregular verbs" because there are so many exceptions.
"It used to look fairly sensible 30 years ago, but economics have changed and new products have come on the market," he said.
Jonny Steel, spokesman for mySupermarket.co.uk, said: "There are some strange discrepancies between the types of foods that qualify for VAT, making it hard to predict where the increase will hit shoppers most."
Top tips for those wanting to avoid the tax rise include buying wheat-based snacks or tortilla chips instead of potato crisps, as well as buying ''freshly baked food'' from supermarket bakeries while it is still warm, rather than ''takeaway hot food'' from the takeaway counter, as this will attract VAT.
When buying gingerbread men, check how much chocolate they have on them – any more than a few dots for the eyes and you will be paying VAT.
Perhaps the most important thing to remember concerns nuts and dried fruit. If you buy them in the baking aisle, you're probably not paying any tax, but if you buy them from the snack aisle you'll be paying the full 20pc VAT. Given that you're probably paying a mark-up for packaging anyway, it makes sense to buy them in bigger bags.
VAT SHOPPING LIST
- Takeaway hot food £1.09
- Cereal bars £1.98
- Partly or wholly chocolate-covered shortbread £1.59
- Crystallised ginger £2.04
- Raisins packaged for snacks 70p
- Squash £1.09
- Potato crisps £1.69
- Ready-made popcorn £2.60
- Prawn crackers made from cereals £1.48
- Shelled roasted or salted nuts £1.15 for 100g
- Ice cream and ice lollies £3.99
- Chocolate-coated biscuits £1.25
- Gingerbread men with chocolate decorations 99p
TOTAL: £21.64
NON-VAT SHOPPING LIST
- Freshly baked food £1
- Flapjacks 73p
- Millionaires Shortbread (with caramel layer) £1.19
- Ginger in syrup £1.85
- Raisins packaged for baking 18p
- Milkshake and flavoured milk drinks 85p
- Crisps made of other vegetables and wheat-based snacks such as tortilla chips 89p
- Microwave popcorn £1.99
- Prawn crackers made from tapioca £1.62
- Roasted or salted nuts still in shells or packaged for home baking 65p for £100g
- Frozen ready meals and baked Alaska £2.97
- Chocolate chip biscuits 49p
- Gingerbread men with a few dots of chocolate for eyes 65p

Given the recent reports on the harmful affects of trans fats I would support Vat being applied to such foods. Again there would be a choice to avoid Vat and be fitter too!

This Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Budget 2010: Britain on 'road to ruin' without cuts

Britain is "on the road to ruin" unless action is taken in the Budget on Tuesday to cut the deficit, Chancellor George Osborne has told the BBC.

Mr Osborne said the coalition had inherited "a truly awful financial situation" and he would set out a four-year plan to deal with it.

Tough action was "unavoidable" but he aimed to provide "prosperity for all".

He also announced ex-Labour minister John Hutton would head a commission into public sector pensions.

Mr Osborne told the BBC's Andrew Marr Show that Mr Hutton's involvement would mean the commission into future pensions would be independent and have cross-party input.

'Decisive action'
The chancellor refused to give more details of the coming Budget, although the BBC understands it will include Conservative election proposals to ease National Insurance for new businesses.

It is expected the employers' threshold for NI will rise slightly - by £21 and Universities Minister David Willetts confirmed on the BBC's Politics Show there would be measures to boost firms outside of the South East of England.

This is expected to take the form of a three-year scheme to exempt start-up firms elsewhere in the UK from paying NI for the first 10 people employed.

Mr Osborne did not comment when asked about that suggestion, but did confirm there would be a levy on banks and an increase in non-business capital gains tax.

Asked about the "badness" of the Budget, he said: "I don't see it as badness, I see it as decisive action to deal with Britain's record budget deficit.

"We sit here as the country in Europe with the largest budget deficit of any major economy at a time when markets and investors and business are looking around the world at countries that can't control their debts.

"And so we've got to deal with that. In that sense it's an unavoidable budget, but what I'm determined to do is to make sure that the measures are tough but they're also fair and that we're all in this together and that, as a country, we take the steps necessary to actually provide the prosperity for the future."

But amid continuing speculation about large scale spending cuts, Labour leadership hopeful Ed Balls warned that the government was on course to "repeat the mistakes of the 1930s".

He said the cuts and tax rises set to be announced in Tuesday's Budget - which he expected to include VAT increases - showed the "unfairness" of the Conservative-Liberal Democrat government's policies.

Fellow Labour leadership contender Andy Burnham said the Lib Dems had "sold their souls" for jobs in government.

Shadow chancellor Alistair Darling said the Conservatives were "using the current circumstances" as an excuse to make "ideologically driven" cuts they had planned anyway and were "using" the Lib Dems "as cover".

While Mr Osborne declined to set out more detail of what would be in Tuesday's Budget, Prime Minister David Cameron has already suggested public sector pay and pensions will have to be restrained.

He said the budget deficit could not be dealt with by "just hitting either the rich or the welfare scrounger" and the Budget would be when "the rubber really hits the road".

Senior Tories and Lib Dems signed off the Budget on Friday with Mr Cameron, Chancellor George Osborne, Deputy Prime Minister Nick Clegg and Chief Secretary to the Treasury Danny Alexander all present.

Forecaster's warning
The involvement of so many high level figures from the two parties is being seen as an attempt to show the coalition is fully on board with the decisions to be announced in Mr Osborne's first Budget, on Tuesday.

One area of possible unhappiness among Lib Dems might be raising VAT - deputy leader Simon Hughes said "all" Lib Dems have been against it "because it's what's called a regressive tax, everyone pays it irrespective of the wealth you have".

Asked if it would be acceptable for the Budget to include an increase VAT, he said: "It won't be the most desirable outcome."

There have been suggestions some state benefits could be frozen and a survey by ComRes for the Independent on Sunday found 53% of the public backed stripping child benefit from wealthier families - including 47% of Labour voters - with 42% opposed to the idea.

But the government's poverty adviser, Labour MP Frank Field, said he was opposed to means-testing child benefit, which costs taxpayers about £11bn a year.

Meanwhile, the influential economic forecaster the Ernst and Young Item Club, which uses the Treasury's own models to make its predictions, said £48bn worth of spending cuts and tax rises were needed to eradicate the part of the deficit which would not melt away with economic recovery.

Mr Osborne confirmed that Capital Gains Tax would rise in the Budget, despite a free market think tank, the Adam Smith Institute, warning it could actually cost the government as much as £2.48bn in lost revenues.

It argues that higher tax rates will discourage individuals from selling assets, denying the government the CGT they would gain from the sale.Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk