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Chancellor to slap VAT on pocket money

Chancellor Gordon Brown is set to confirm that as of 1 May all pocket money will be subject to VAT at 17.5 per cent.

Brown's announcement is part of the same government fundraising initiative which proposed that any funds raised for charity by runners in last week's London Marathon be subjected to VAT. Economic insiders say that the cash raised will be used for the "advancement of democratic ideals", thought to mean that the expected £7bn windfall will be ploughed into home secretary David Blunkett's voluntary/compulsory ID card scheme.

The Treasury did, however, explain that kiddies under five and those receiving less that 50p per week pocket money will be exempt from taxation "as long as they can produce valid ID to prove their age", as one member of Her Imperial Majestyness Queen Liz II's Customs and Excise put it to The Rockall Times. They will, however, be required to complete their own declaration forms "without parental assistance".

Officials warned that parents who attempted to help their offspring fill in said forms, or who deliberately avoided declaring the payments would face fines of "up to £1,000 or imprisonment". Anyone declaring that their children did not in fact receive pocket money would not be believed and taxed on the estimated national average — believed to be around £5,000 per child in the UK. This mean figure excludes short-term loans for X-Boxes and Nike trainers, or Xmas fivers from aunties, all of which would attract income tax at the rate of 20 per cent above a personal allowance threshold of £250.

Despite these measures, government advisors warn that the total cost of the proposed ID card scheme would exceed £25bn by 2010, requiring yet further cash input.

Accordingly, a government-sponsored thinktank has come up with the idea that all "pub loans" should be liable to capital gains tax at 40 per cent. "We know it's very common for people in hostelries to 'borrow a tenner' til payday from their mates. We believe that such transactions must be subject to the same regulation as that which governs the business sector," asserted an economic theorist.

Under the new rules, any £10 loan accepted to "get a round in" or "play the frutie 'cos it's just about to pay out" must be declared. Upon repayment, the loanee will be required to pay back both the original loan and £4 to the exchequer.

When asked how the government intended to enforce these controversial new regulations, a spokesman told us: "With CCTV cameras. Millions of them, and all paid for by speeding fines, parking fines and wheelclamping charges."

There are, however, two sectors who will be completely exempt from both new levys — those over 140 years of age and with a valid and current ID card to prove it and elected members of parliament. The latter have been excluded because "asking a busy MP to keep track of monies loaned in one of the House of Commons' 24-hour bars would seriously impede the democratic process", as one red-nosed Home Counties member explained.

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