HL Deb 13 March 1980 vol 406 cc1204-5

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government whether any saving in administrative costs would be made if agricultural fertilisers were exempt from value added tax.

The MINISTER of STATE, TREASURY (Lord Cockfield)

No, my Lords. Neither exemption nor zero rating of agricultural fertilisers would save administrative costs and might indeed increase them. This is because most manufacturers of fertiliser would become partially exempt traders, with all the additional complications which that involves. Nor would exemption he in the interests of the farmer himself because it would mean that some tax would be included in the cost of fertilisers and could not he reclaimed against output tax.


My Lords, I thank my noble friend for that reply. Does it not seem curious to pay one lot of people to collect the tax and another lot to pay it back? Does that not add to the cost?


No, my Lords, it does not work like that. If agricultural fertilisers were exempt from VAT it would be necessary for the manufacturers to distinguish between their exempt and their chargeable output, as most manufacturers of fertilisers also manufacture other chemicals. That would result in a considerable increase in the burden of administration and create considerable problems.


My Lords, is it not a fact that it would be administratively impossible to distinguish between the use to which fertilisers were going to be put at the point of sale? Therefore, far from reducing the possible costs, if the advice in the Question were followed it would increase them and make a complete muddle of the whole operation of VAT in the fertiliser industry.


My Lords, my noble friend has a very valid point and what he says is entirely true.


My Lords, is the Minister aware that the only free gift a farmer ever gets from the Government is that occasionally he gets the VAT back before he pays the supplier of the fertiliser? Will the noble Lord see that this excellent practice is not put a stop to?


My Lords, I am glad to hear the noble Lord so much appreciates the efforts of the Government in this direction.