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UK VAT cut proposal as inflation surges

UK government evaluating standard VAT rate cut from 20% as inflation passes 9%

Prime Minister Boris Johnson’s chief of staff Steve Barclay has proposed a temporary 20% headline rate cut of the tax, according to a Times newspaper report, adding a temporary cut would reduce the tax bill for millions.

The UK cut its standard VAT rate from 20% to 17.5% in 2009 during the financial crisis.

Chancellor’s Spring Statement cuts on green VAT and Fuel Duty as inflation hits 6.2% – 30 year high

The UK Chancellor, Rishi Sunak, delivered his annual Spring Statement. This included a number of indirect tax measures:

  • The supply with  installation of domestic insulation, solar panels and heat pumps (energy saving materials) will be cut from 5% to zero from April 2022 for 5 years. Wind and water turbines will also be included as qualifying technologies. This measure will cost £280 million. However, because of uncertainty on the Northern Ireland Protocol VAT position, this cut will not initially apply there until futher discussion and agreement is reached with the EU. In the meantime, the Northern Ireland Executive will receive a Barnett share of the value of this relief until it can be introduced UK-wide.
  • Fuel Duty will be cut by 5 pence per litre until March 2023. This will cost over £5 billion

Other European cuts on VAT on fuel and foods have been passed or are under review.

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