Eight thrifty tips for a VAT-free shopping basket

UK readers will know that VAT is due to rise from January 2011, from 17.5 per cent to 20 per cent. (For non-VATable readers from elsewhere: VAT is short for Value Added Tax and it is like U.S. sales tax, except that it is added onto the price tag rather than at the checkout. Oh, and individuals can’t reclaim it. Nobody likes it.)

Now at the time of writing, January 2011 is still a way away, but this hasn’t stopped people stroking their chins and pondering the impending rise. My eye was caught by this piece in the Telegraph, about the foods upon which VAT is levied and the foods that are VAT-free. This is a subject that is far more bewildering and complex than you might think!

VAT law is supposed to split your supermarket shop between two categories; essential foods, which are zero-rated so that you don’t pay any tax, and luxury foods that will be subject to a 20pc tax.

However, because of the difficulty of deciding what constitutes a luxury item, it’s possible to buy very similar products at 20pc less than others because they are VAT-free.

Daniel Lyons, VAT partner at accountancy firm Deloitte, said that VAT law was “like French irregular verbs” because there are so many exceptions.

“It used to look fairly sensible 30 years ago, but economics have changed and new products have come on the market,” he said.

Although I take great pleasure in spending next to nothing at the supermarket, I’m always looking for additional savings.So here are ten ways to remove VAT from your shopping basket. To be honest many of them apply to snack foods, which I tend to buy little of anyway. But to purloin a catchphrase from one of our supermarket behemoths, every little helps, right?

1. The baking aisle is VAT-free – so use it! If you snack upon nuts and dried fruits, for example, get them from here rather than from the snack aisle. The Telegraph notes: Given that you’re probably paying a mark-up for packaging anyway, it makes sense to buy them in bigger bags.
2. Cereal bars are subject to VAT. Flapjacks, on the other hand, are not.
3. Chocolate-coated biscuits are subject to VAT. Chocolate chip biscuits are not.
4. Swap VATable crisps for VAT-free tortilla chips. (See: I told you these rules were far from straightforward!)
5. Swap the squash drinks for VAT-free milk and milkshakes.
6. Ditch the readymade popcorn for the microwaveable variety. Or even better, go for the larger packets of unpopped corn instead – these cost pennies, and I don’t know why so many people shy away from them. Popcorn is easy to make!
7. If you really must go picking out fancy bits and pieces from the bakery section, avoid cakes and cookies with “chocolate decorations”. However if chocolate has been applied sparingly, such as a gingerbread man with just a few chocolate dots for eyes and buttons, you should be fine.
8. This is the bestest tip of all, and it comes not from me, the Telegraph or some wonk at Deloitte, but from Miss Thrifty reader Claire! She hopes that the VAT rise will encourage us to think about our spending more carefully and consume less. “You have a choice about whether to consume or not and therefore to pay it or not, especially as most necessities are currently VAT free and remain so”, she notes.

A great point, well made – thanks Claire!