Passports to raise £3m in “stealth tax”

The Treasury is set to rake in up to £3million from horse passports through VAT, if campaigners do not succeed in revoking what has been slammed as a stealth tax on horse owners.

VAT is charged on every passport issued, whether by a charity, breed society or commercial organisation. If there are, as estimated, 800,000-plus horses in the country, and a passport is charged at £20, the windfall for the Treasury’s coffers could reach £3m.

Many passport issuing organisations (PIOs) set prices for passports before being told that they would have to pay 17.5% tax on each one, and some may now raise prices. Many PIOs already “absorb” VAT into the cost of the passport.

Treasury spokesman Lord Davies of Oldham told the House of Lords last week: “Customs believes horse passports will be issued commercially by non-public bodies. Under VAT law, the services of non-public bodies are normally subject to VAT when a price is charged.”

The British Driving Society (BDS), which has issued almost 15,000 passports, raised the issue with Customs and Excise last year.

John Parker, chairman of the BDS, explains: “Most PIOs are non-profit-making societies, many of which are not eligible to register for VAT. The Treasury is getting a £2m-plus windfall — it isn’t much to them, but it’s a lot for the horse world and could be put to better use.

“It is grossly unfair that [the equestrian industry] should have to pay tax on a compulsory licence. There’s no VAT on human or cattle passports or TV licences.”

Customs and Excise, and not DEFRA, has interpreted the VAT regulations to apply to horse passports. DEFRA confirms it is in discussions with the Treasury over this.

A spokesman for the British Horse Society (BHS) says: “We were not aware of the VAT issue until last week so have been advising that VAT receipts were not applicable. But we will not put our prices up and will absorb VAT in existing fees.”

Read the full story in the current issue of Horse & Hound (11 March 2004)

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