inheritance tax rate applies. There are some important exceptions to this treatment: the most important is the "reservation of benefit rule", which says that a gift is ineffective for inheritance tax purposes if the giver benefits from the asset in any way after the gift (for example, by gifting a house but continuing to live in it). Inheritance Tax is not levied on the estate of persons who died "on active service" or from the effects of wounds sustained on such service...regardless of how long after that may be if it can be proven as the cause of death. In addition as the deceased spouse is subject to an exemption that full nil rate band is transferable to the surviving spouse's estate on the survivor's death. Council Tax Council tax is the system of local taxation used in England, Scotland and Wales to part fund the services provided by local government in each country. It was introduced in 1993 by the Local Government Finance Act 1992, as a successor to the unpopular Community Charge ("poll tax"), which had (briefly) replaced the Rates system. The basis for the tax is residential property, with discounts for single people. As of 2008, the average annual levy on a property in England was £1,146. In 2006–2007 council tax in England amounted to £22.4 billion and an additional £10.8 billion in sales, fees and charges, Sales taxes and duties Value added tax The third largest source of government revenues is value added tax (VAT), charged at 20 percent on supplies of goods and services. It is therefore a tax on consumer expenditure. Certain goods and services are exempt from VAT, and others are subject to VAT at a lower rate of 5 percent (the reduced rate, such as domestic gas supplies) or 0 percent ("zero-rated", such as most food and children's clothing). Exemptions are intended to relieve the tax burden on essentials while placing the full tax on luxuries, but disputes based on fine distinctions arise, such as the notorious "Jaffa Cake Case" which hinged on whether Jaffa Cakes were classed as (zero-rated) cakes—as was eventually decided—or (fully taxed) chocolate-covered biscuits. Until 2001, VAT was charged at the full rate on sanitary towels. It was introduced in 1973, in consequence of Britain's entry to the European Economic Community, at a standard rate of 10 percent. In July 1974, the standard rate became 8 percent and