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General Election: VAT Perspectives – Green Party

by Berthold Bauer on July 2, 2024

On 22nd May 2024, Prime Minister Rishi Sunak announced a general election to be held 4th July 2024, prompting speculation about tax measures each party might adopt.

This article seeks to pull out the VAT policies as contained in key party manifestos, and touches on the on rationale, impacts and uncertainties these bring. For avoidance of doubt, this article does not seek to comment on resources beyond the manifestos, e.g. interviews, debates, statements from candidates in isolation, etc.

Green Party

we will further incentivise the growth of solar and other renewables with mechanisms that could include installation grants and green mortgages, as well as reducing VAT

  • For domestic and charity installations of solar and other renewables, the zero rate of VAT already applies until 1st April 2027, from which date this will be at the 5% rate of VAT. The main beneficiary to a reduction in VAT on these installations would be businesses and other bodies that do not fit neatly into the current application, e.g. NHS bodies.
  • This would likely stimulate the Green Energy Market and put towards long term energy the savings. However, the lack of detail on how the loss of VAT revenue would be covered, as well as how this policy would be applied in practice, e.g. sector targeted, only certain types of renewables, etc. is to be seen.

We would also propose a range of changes to VAT, reducing it on hard-pressed areas such as hospitality and the arts and increasing it on financial services and private education’

  • Aside from proposing a range of changes in these sectors, no further detail is given. If we look at estimates that each makes up of the UK GDP, we can get a rough idea of what the net VAT impact may be – noting that the below are taken from averages from various sources and methodologies and are example illustrations only:
    • Hospitality: Typically around 2-3% accounting for accommodation, food services and related activities.
    • The Arts: Much harder define, with certain cultural exemptions already available in this area for VAT purposes. If we look at performing arts, museums and galleries this generally contributes around 0.5% of UK GDP.
    • Financial services: A significant part of the UK economy accounting for approximately 7-8% of UK GDP, including banking and insurance.
    • Private Education: Estimating this is difficult, especially as the Greens only state ‘private education’ leaving the scope open for institutions other than independent schools, e.g. would Universities be captured in this also? Estimations of GDP tend to be around 0.5-1% of UK GDP.
  • It is clear that Financial services would generate the most VAT revenue, with a net increase to VAT revenues. However, with Financial services forming such a significant part of the UK economy, one questions to what extent would the Greens go after this sector in practice given the number of jobs dependent on this.

‘…removing charitable status from private schools and charging full VAT on fees. Private school places for children with special education needs will not be subject to VAT. This will be an interim measure while public-sector capacity is built.’

  • The approach to removing charitable status matches what many commentators expect to be the way that Labour would implement their policy of applying VAT to independent schools. Labour’s policy is broad leaving for much interpretation on application currently whilst the Greens’ own version of this make clear that those schools with places for ‘children with special education needs will not be subject to VAT’ – albeit as only a temporary measure.
  • Whilst there are many schools out there that are SEND focused, undoubtedly many schools with only a few places will push to be included within this exemption also. The Greens would need to be careful that schools would not try to distort their place numbers based on this exemption or spin out parts of schools solely to achieve this exemption.

Exempt cultural events, including everything from theatre and museum tickets to gigs in local pubs, from paying VAT.

  • Currently entrance fees to museums, art galleries, art exhibitions and zoos may be exempt from VAT, subject to further criteria. This policy looks to extend this to a much broader sector of cultural events – it would be interesting to see what events the Greens would deem as cultural and one can already imagine the difficulties some will have when applying this to tickets that also provide the customer with additional services, e.g. provision of a meal and a drink in the same ticket.

 

See other party VAT perspectives:
Conservative Party
Labour Party
Liberal Democrats
Reform UK

 

We have been in conversation with many organisations on the potential impacts these policies may have on them and their viability. If this is something you would like to discuss further, then please contact us via our free VAT helpline and a consultant will reach out to you to discuss.

Berthold BauerGeneral Election: VAT Perspectives – Green Party

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