UK govt turns down plea for ice cream VAT cut

02-Aug-2011 - Last updated on 03-Aug-2011 at 13:31 GMT

An appeal to cut VAT for ice cream has been turned down by the UK government.

UK trade body the Ice Cream Alliance (ICA) wrote to the UK treasury with a request to classify ice cream as a food rather than a luxury item, reducing its VAT loading from 20 to zero per cent.

The plea was made in response to soaring ingredients, fuel and VAT costs.

“This coupled with recent wet summers and harsh winters has seen sales drop alarmingly for some ice cream sellers and there is a fear that many could be forced out of business,” said the organisation.

VAT cuts would offer a boost to the UK ice cream industry, which is worth more than £1.3bn, (€1.5bn) said Zelica Carr ICA CEO.

In her letter to HM Revenue & Customs (HMRC), Carr said a reduction in VAT on ice cream would "be welcomed by a struggling ice cream industry and would have a significant and positive impact upon the spirit and morale of the nation."

"Unfortunately, faced with such substantial increases many ice cream manufacturers and sellers will have to pass at least part of the increase on to customer, but this rise could be cancelled out if VAT on ice cream was reduced," she said.

EU law restrictions

However, HMRC told the ICA that the UK was restricted by EU law.

"VAT is an EU-wide tax, the scope of which is set out in EU law under the terms signed by successive UK governments with our European partners,” said anHMRC spokesperson

"These agreements do not allow the UK to extend the scope of its existing zero rates or introduce new ones,” they said.

In response, Carr said she was surprised that the government claimed it no longer had the power to determine domestic VAT matters.

“The response from HMRC was disappointing. Whilst HMRC has advised that VAT is an EU-wide tax governed by EU Law - it is the UK government that has increased VAT on ice cream to 20 per cent [so] surely it must also have the power to reduce it.

"I do appreciate that the country has fiscal challenges, and that is precisely why I raised this as an opportunity for the Chancellor of the Exchequer to give a much needed boost to the ice cream industry,” she said.