HC Deb 10 November 1977 vol 938 cc835-8
6. Mr. Woodall

asked the Chancellor of the Exchequer if he will consider zero- rating VAT on hand-controlled conversions of motor cars for invalid persons.

Mr. Denzil Davies

No, Sir. Such relict has been considered on a number of occasions but could not be justified in the context of a broadly-based tax.

Mr. Woodall

Does my hon. Friend accept that that is a very disappointing reply? Is he aware that the number involved is very small indeed. Does he realise that they are usually people who have used their own money both to purchase the vehicle and to convert it, rather than accept the State-provided vehicle? Does my hon. Friend agree that to convert the vehicles would cost very little, because they are usually small? I have yet to see a hand-controlled version of a Rolls-Royce. Will my hon. Friend look at this matter again?

Mr. Davies

I accept entirely that my hon. Friend and many others will agree that this is a disappointing reply. Of course it is not a question of revenue, as he has indicated. In an expenditure tax such as VAT it is important that there should be as few exceptions as possible, because there are many competing claims with equally good cases. If such claims succeed the base of the expenditure tax is eroded.

Mr. Marten

Will the Government be allowed to do this under the Fifth Directive of the EEC?

Mr. Davies

I should need notice of that question.

10. Mr. Townsend

asked the Chancellor of the Exchequer what plans he has to reduce the cost and inconvenience of operating value added tax.

Mr. Denzil Davies

In consultation with representative trade associations, Customs and Excise is currently carrying out a review of VAT procedures to see whether there is scope for simplification and for reducing the burden on traders.

Mr. Townsend

Why do not the Government take a simple step back to sanity prior to the General Election and return to a single positive rate, as there was when this very successful tax was first launched?

Mr. Davies

There are many consequences of returning to a single rate, and the effect on the RPI is one factor; but all these matters are kept under review.

Mr. Welsh

I wonder whether the Minister reads VAT News on a regular basis. Has he any idea of the physical volume of this combined publication and its mind-bending effect on small traders who are faced with this regular flow of words in their direction?

Mr. Davies

I cannot say that I read VAT News on a regular basis, but ever since the Tory Party introduced VAT in 1972 the Labour Party and the Labour Government have tried to mitigate some of the worst consequences.

Mr. Pardoe

Does the Minister accept that below a threshold of £20,000 it is not worth while the Government collecting the tax, and below a threshold of £50,000 it is not worth the country collecting the tax, taking both the costs to the employer and the Government combined? What does the Minister intend to do about this? Does he believe that he is constrained by the Conservative Government's threshold of £5,000 revalued, or is he prepared to break out of the Conservative net?

Mr. Davies

As the hon. Gentleman will know, from 1st October we have raised the threshold to £7,500, and consideration is being given to a simplification of the tax. But I am bound to say that so far very few traders—about one-fifth of all the traders who could deregister—have taken advantage of that raising of the threshold.

Mr. Peter Rees

Arising out of the Minister's answer to my hon. Friend the Member for Bexleyheath (Mr. Townsend), will the Minister tell us whether the Customs investigatory powers also will be the subject of this review?

Mr. Davies

I am not aware that the investigatory powers are being considered. The review is considering the simplification of procedures to make it easier for traders to fulfil their obligations.

11. Mr. McCrindle

asked the Chancellor of the Exchequer if, in the light of the VAT tribunal decision on 3rd February 1977, he will state the position of companies wishing to reclaim VAT on petrol supplied for employees' cars since that date.

Mr. Denzil Davies

The tribunal decided that the VAT on petrol supplied by the appellant for the private motoring of employees could be reclaimed as "input "tax. However, tax is chargeable in many cases when the petrol is subsequently supplied by a company to its employees and from 1st January 1978 tax will be chargeable in all such cases.

Mr. McCrindle

In simple terms, is the Minister telling me that if an employer has supplied petrol to his employees for both business and personal use, any claim made now by that employer for the reimbursement of the VAT will be considered?

Mr. Davies

This is not a simple tax, unfortunately, and it is difficult to give an answer on it in simple terms. However, as a result of that case, although the input tax can be reclaimed, Customs and Excise takes the view that in many cases, where there is an obligation on the part of the employer, an output tax also is chargeable.

The hon. Gentleman looks surprised, but it follows from the logic of the tax. If an input tax is chargeable, an output tax must be levied as well. But the position is even more complicated than that, as I am sure the hon. Gentleman will appreciate.

Mr. Marten

Would it not be a good idea if the Government were to produce a simple guide on VAT and the restrictions that the Sixth Directive places upon the Government's freedom of action and distribute it to some of my friends, who keep asked for a £10,000 limit, which one cannot have under the Sixth Directive?

Mr. Davies

A simple guide on VAT is practically impossible. A simple guide on VAT and the Sixth Directive is even more nearly impossible.