Case Study: VAT Changes Flashcards

1️⃣ Familiarise yourself with the flashcards:

Look through all the flashcards to see what's on both sides.
Make sure you understand the information on each card. If something's unclear, click the link to the revision notes at the bottom of the page for more details.

2️⃣ Test yourself:

Look at the question or prompt on each card and try to remember the answer before flipping it over.
Check the answer and make a note of any cards you find challenging and need to go over more.

3️⃣ Consistently Review and Practice:

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Note: We may include questions that have multiple correct answers. It's useful to remember specific examples to understand these concepts better.

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What does VAT stand for, and what does it tax?

Value Added Tax. A tax on spending on goods and services.

Indirect.

Ad valorem. It is a percentage of the price.

20%. It has been 20% since 2011.

To boost spending during the recession. The rate fell from 17.5% to 15%.

The standard rate rose to 20%. It aimed to raise tax revenue.

It was cut to 5% to help hotels, cafés, and pubs during Covid-19.

Prices usually go up. Inflation can rise for a while.

Prices fall, so real incomes rise. This can lift spending.

No. Firms may absorb some of it if there is strong competition.

Zero-rated is 0% VAT, e.g., most basic food and children’s clothes. Reduced-rate is 5%, e.g., domestic gas and electricity.

Low-income families spend more of their income, so a VAT rise hits them harder. Zero-rated essentials help.