Once in a while we get a VAT case that underlines the stupidity of a tax that raises billions and gives back 90%, but with a potential to cause injustice and misery on its way.
Several years ago we had the Jaffa Cakes case, which needed to decide whether a Jaffa cake was a cake or a biscuit. Why? Because VAT is chargeable on biscuits but not on cakes. The decision was made on the fact (?) that stale biscuits went soft but stale cakes went hard.
This month we have had a similarly earth-shattering decision. Is Bridge a game or a sport?
The English Bridge Union (EBU) failed in its bid to reclaim VAT on £631,000 of tournament fees. They argued that Bridge was a sport rather than a game, and VAT was therefore not chargeable on tournament entry fees. The VAT office argued, of course, the opposite, stating that a sport was something that involved physical activity or fitness.
The EBU submitted correspondence to the tribunal from French, Dutch, Belgian, Irish and Polish bridge bodies explaining that VAT was not charged on entry fees in their countries. It was also pointed out that bridge was recognised as a sport by the Olympic Committee.
HMRC include such activities as croquet, flying and gliding as sport, as well as such obviously strenuous activities as darts, billiards and pigeon fancying!
Farcical as this case is, it does illustrate that, whilst VAT is in principle a simple tax, there are a significant number of complexities introduced by the bureaucrats, and these can have devastating consequences including people being declared bankrupt, or companies being forced into liquidation with the resultant loss of jobs.