Value Added Tax

HC Deb 17 July 1974 vol 877 cc146-7W

Mr. Nigel Lawson

asked the Chancellor of the Exchequer whether he will consider relieving contraceptives from value added tax, in line with the exempt status already accorded false teeth, glasses and other appliances obtainable on NHS prescription.

Dr. Gilbert

Contraceptives prescribed by a doctor and dispensed by a pharmaceutical chemist are already zero-rated for VAT while contraceptives otherwise supplied in connection with the medical services provided by a doctor or State registered nurse are exempt.

Mr. Horam

asked the Chancellor of the Exchequer if he will make a statement about the effect of VAT on the amount of emoluments chargeable to income tax under Schedule E.

Mr. Joel Barnett

Yes. The Inland Revenue is now advised that where a director or employee is liable to income tax in respect of payments made to him or on his behalf by his employer or in respect of expense incurred by the employer in providing him with a benefit, the liability is on the full amount of the expenditure incurred, inclusive of VAT. This is so whether or not the employer may subsequently recover all or part of the VAT. The change in the basis of measuring benefits—from VAT-exclusive to VAT-inclusive—which is now required will apply to benefits received in 1974–75 and subsequent years.