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Thanks Dave G for your thorough breakdown (as usual). I'm much wiser.
..I cannot understand why newspapers & in particular motoring magazines, are zero-rated for VAT?
In reply to Edward, I think the current zero VAT rating on newspapers just reflects the power of the UK press. There would probably have to be a cross-party agreement between the three main political parties before you saw an attempt to introduce VAT on newspapers.
I actually got the story about the history of VAT on domestic energy wrong in an earlier post. The Major government didn't reduce VAT from the standard rate to 8%, they actually increased VAT on domestic fuel and power from zero-rated to 8%. (I'd forgotten how incompetent John Major was).
The story is given in this PDF link:
VAT on fuel and power was zero when VAT was first introduced in the 1970s as part of the UK joining the Common Market. It got increased to the standard rate, but only for industry and commerce, in 1990. Then the Major government decided to slap VAT on domestic energy as well, claiming this was needed for Britain's CO2 reduction commitments made at the 1992 Rio Earth summit. The increase was intended to be applied in two stages, an 8% rate introduced in 1994 followed by the full standard rate (of 17.5%) in 1995. However the Labour opposition managed to defeat the attempt to increase it to the full rate. When Labour got into power in 1997 they reduced the VAT rate from 8% to 5%. Apparently a zero VAT rate, once given up, cannot be re-instated under EU rules, and the EU doesn't allow a lower reduced VAT rate than 5%, so we're stuck with 5% VAT for domestic energy.
As I remember it, another thing the Major government introduced after the 1992 Rio Earth summit was the 'fuel price escalator', which eventually resulted in the UK having just about the highest petrol price in Europe at the end of the decade, and led to the fuel protests of 2000. The Major government pretty much introduced Greenery into British mainstream politics, though much of it was probably a cover for shutting the coal mining industry down.