Overview

This bill aims to expand the range of children's clothing exempt from Value Added Tax (VAT) in the UK. It will increase the age limit for VAT-exempt children's clothing and add certain school uniforms to the list of VAT-exempt items.

Description

The bill makes two key changes to the Value Added Tax Act 1994:

Expanding the Definition of Children's Clothing

It broadens the definition of "children's clothing" for VAT exemption purposes. The current age limit ("young children") will be replaced with "children under 18". The Treasury will be responsible for defining "clothing and footwear" for this age group, considering average children's measurements and allowing for updates as average sizes change.

Zero-rating School Uniforms

It introduces a new category of VAT exemption: articles designed as school uniform. This exemption will apply if the uniform bears a school logo or insignia, is sold by or through a school, or is sold in a manner defined by the Treasury. The definition of "school" will include relevant schools under the Education (Guidance about Costs of School Uniforms) Act 2021, with the Treasury having the power to add other types of establishments.

Government Spending

The bill is expected to reduce government VAT revenue. The exact amount is difficult to predict without detailed analysis of current children's clothing sales and future purchase patterns following the bill's implementation, but the overall effect will be a loss in tax revenue.

Groups Affected

The bill will primarily affect:

• Families with children: They will benefit from lower prices on a wider range of children's clothing and school uniforms.
• Children's clothing retailers: They may see increased sales due to lower prices making clothing more affordable.
• Schools: The bill may affect their income if they sell uniforms directly but the reduction in uniform costs will also benefit parents and therefore the schools' community as a whole.
• The UK Treasury: It will experience a decrease in VAT revenue.

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