Part of the 2012 budget was dedicated to making the tax system simpler. Channel 4 News casts an eye over the topsy-turvy world of value added tax.

VAT simplification means supermarket rotisserie chickens may cost more (Getty)

The government's drive to simplify the rules that govern which products attract value added tax (VAT) aims to close some of the loopholes identified in a 2011 report from the Office of Tax Simplification.

But it is fair to say that many consumers may not have had any idea about which products did attract standard-rate VAT - currently 20 per cent - and which were VAT-exempt.

The many anomalies of the current VAT regime were hinted at by the Chancellor George Osborne in his budget speech: "At present, soft drinks and sports drinks are charged VAT; sports nutrition drinks are not."

Items that previously did not, but are now expected to attract VAT include:

  • Angostura bitters
  • Hairdressers' chairs
  • Luncheon vouchers provided by workplaces
  • Static holiday caravans
  • Rotisserie chicken sold by supermarkets
  • Alterations to listed buildings
  • Black beer

Yorkshire tipple

The decision to impose VAT on black beer will be another blow to some pensioners, coming hard on the heels of a raid by the government on the pensions of those soon to retire. In the notes explaining the decision, HMRC says: "There is only one known producer of black beer, based in Yorkshire,... Black Beer is mainly consumed by small numbers of people in the over 65 age group in Yorkshire."

Labour Treasury spokesman Owen Smith has already protested at the new measures: "The decision to slap VAT on more regular purchases is another stealth tax on middle and lower income families." He went on to claim that the decision to put VAT up to 20 per cent in 2011 is costing families with children an average of £450 per year.

Bakery chain Greggs said it would be lobbying the government. "We do not believe that our freshly baked savoury products should be subject to VAT and we will be making strong representations to the government regarding the proposed changes," said a spokesman.

Perhaps the most famous product in relation to the charging of VAT is the Jaffa Cake. Despite its name, this well-known comestible is usually found in shops alongside other brands of biscuits. But in terms of tax, HMRC stipulates that chocolate-covered biscuits attract VAT while chocolate-covered cakes do not. The manufacturers went to court to establish their rights to avoid charging VAT on Jaffa Cakes and won - the clinching argument was that Jaffa Cakes, unlike biscuits, start soft and go hard when stale. Full details of the case can be seen in this government advice: The borderline between cakes and biscuits.

That was some years ago, but the briefest consideration of some of the multitude of the current regulations shows that the decision to charge VAT or not remains an arcane business:

"You must always standard-rate (SR)... ice cream, similar products, and mixes for making them - see 3.5;

but you can zero-rate (ZR)... frozen yoghurt that is designed to be thawed before being eaten."

No wonder the government wants to simplify things.