VAT: Transitional Arrangements (Hansard, 15 December 1992)

The Minister of State, Department of Transport (The Earl of Caithness)
My Lords, the majority of the orders implementing the transitional arrangements for the collection of VAT from 1st January 1993 were laid on Monday 14th December. Six orders which are subject to affirmative resolution are to be laid this 493 Thursday. Two further orders which are necessary as a result of a directive agreed at ECOFIN yesterday will also be laid on Thursday. It is therefore intended that all aspects of the new system will come into force on 1st January 1993.

§ Lord Mottistone
My Lords, does my noble friend agree that that is very late in the day? It is extremely difficult for people to comply with what I believe is a complicated new system—even more complicated than its predecessor. Will he also confirm that the only document giving evidence that the transaction has taken place is that which will be carried by the lorry driver? Is he happy that lorry drivers will be encouraged to return these documents quickly?
May we also be assured that, where a purchaser in one country from a supplier in a second country requires delivery to a third country, there will not be double taxation? Finally, can my noble friend assure me that simplification of rules for triangular transactions will be included in the documents which he said were being laid before Parliament at the moment?

The Earl of Caithness
My Lords, I lost count of the number of questions my noble friend asked, but I will answer the first two. Yes, the orders are late in the day. The reason is that the base directive was only agreed in December 1991. We had to have primary legislation—that was the Finance (No. 2) Act, all 70 pages of it, as your Lordships will remember. We then drafted the secondary legislation, exposed it for consultation, made the amendments and have now laid it before Parliament. Yes, my Lords, I agree with my noble friend, it is complicated.

§ Lord Howie of Troon
My Lords, is the Minister aware of the anxieties which have been expressed by the Periodical Publishers Association on the imposition of VAT on subscriptions to British magazines sold in other EC countries? Will the Government consider exempting items sent through the post and weighing less than five kilograms, including magazines? That would be in order to reduce the bureaucratic burdens on the magazine publishing industry. I believe that that is the case in Germany.

The Earl of Caithness
My Lords, the noble Lord has asked me quite a difficult question, I have about 1½ inches of paper on it. Perhaps I may write to him with a specific answer.

§ Lord Howie of Troon
My Lords, with the full 1½ inches!

§ Lord Boyd-Carpenter
My Lords, will my noble friend explain how orders requiring an affirmative resolution laid on Thursday can possibly come into effect before 1st January?

The Earl of Caithness
My Lords, the orders are deliberately designed to give the maximum time for debate in Parliament. That is why they were laid on Thursday rather than earlier. If we had laid them earlier, there would have been less time for debate. They will apply from 1st January, although we shall not have a chance to debate them until next year.

§ Lord Stoddart of Swindon
My Lords, are these transitional arrangements likely to impose additional costs on industry and commerce? If so, can the noble Earl give an estimate of those additional costs?

The Earl of Caithness
Yes, my Lords, there will he some additional costs. At the moment, under what is known as the temporary provisions, someone has, for example, been able to buy a yacht, motor car or plane in this country, take it to another EC country and avoid paying VAT on it. From 1st January, VAT will be payable, but I cannot give the noble Lord an estimate of the costs.

§ Lord Cockfield
My Lords, does my noble friend agree that the directives adopted yesterday to modify the transitional system simplify it? Is that not a matter for congratulations rather than criticism?

The Earl of Caithness
My Lords, I am grateful to my noble friend for those comments. He knows the dossier, or dossiers, better than anyone else in your Lordships' House having been the originator of them, although we have ended up with a slightly different system. He is absolutely right to say that a simplification directive was agreed which will be to the benefit of all traders.

Lord Bruce of Donington
My Lords, the noble Earl will be aware that for the next six months after 1st January we shall be without reliable statistics concerning our imports and exports from the remaining countries of the EC, due to the new regulations. Will he confirm that the arrangements for the satisfactory collection of interim trade statistics for the remainder of the EC, in so far as these can be reliably ascertained, are now in place?

The Earl of Caithness
My Lords, the noble Lord raises an important point. Now that there will be an abolition of frontier controls on 1st January, the point which he raised is one of the difficulties resulting from that abolition. Perhaps I may assure the noble Lord that every effort is being made to obtain the best statistics available.

§ Lord Richard
My Lords, does the Minister recognise that there is a problem? From 1st January companies will have to operate a new system with which they are basically still unfamiliar. Does he also agree that Her Majesty's Customs and Excise are not perhaps noted for their flexibility when it comes to the collection and coding of VAT? Can he assure the House and the companies which will have to operate the system that Customs officers will be understanding of genuine lapses by companies in the early days of implementing these new and complex charges?

The Earl of Caithness
My Lords, it will not only apply to this country; all member states will be in the same difficulty with the new directives coming into force on 1st January. What I can say to the noble Lord the Leader of the Opposition is that the Customs and Excise have gone to immense trouble to keep in touch with traders by holding seminars, printing leaflets and sending out newsletters. They are setting up a special office in Dover to try to help in the first three months.

§ Viscount Caldecote
My Lords, will my noble friend ensure that in the present difficult circumstances the problems of small companies are taken fully into account in the arrangements for collecting VAT?

The Earl of Caithness
My Lords, I am sure that the Customs are aware of the problems of small businesses, but I shall certainly draw this matter to their attention.

§ Lord Mottistone
My Lords, will my noble friend give consideration to writing to me with the answers to the questions I asked him? I quite understand that he found them too difficult to answer off the cuff, but it would be helpful if he would write to me. Many people are worried about the points that I raised.

The Earl of Caithness
My Lords, the questions were not too difficult to answer off the cuff; they were too numerous to answer off the cuff. But of course I shall write to my noble friend.