Thinking VAT here. Is it really the case that electricity used to power trains is rated at 20% vs diesel at 5%? (cf aviation fuel a... but let's not go there...)

Mark

 

Businesses exceeding the annual turnover threshold (currently £90,000, but likely to be reduced so that very small businesses get caught) are able to reclaim the VAT that they pay on their inputs.  For most businesses, this is a set-off against the VAT that they must charge customers and hand over to the Revenue.  But where businesses don't charge VAT on what they sell (such as train fares) the VAT is repaid to the business by HMRC

VAT is a neutral to most businesses (apart from the hassle of being an unpaid tax collector, and keeping up with the admin).  It's a tax on all of us as consumers.  The admin is a disproportionately large burden on small enterprises, which is why, up until now, there has been a turnover exemption for the smallest ones

 
Yes and no.  I see that Witham Booby has just answered, but here's a more rail-specific version.

Electricity supplied to the railway is standard rated (unlike domestic supply, which bears 5%). The diesel bought by the railway is "rebated red diesel", meaning there is a 5% concessionary rate of VAT on it.

However, passenger travel is zero rated, and domestic goods transport standard rated, so the majority of the VAT paid on supplies is reclaimed. The VAT on that element in revenue is substituted by the rate of zero or 20% applied to that product. There are, as is normal practice, a few odd exceptions to this charged at the other rate. There may well be a few items of railway revenue that are VAT exempt - which means the difference in VAT rate paid on supplies is retained as is, just for that element.