§ Mr. Coleman
asked the Chancellor of the Exchequer what representations he has received relating to the practice of certain tour operators in charging clients a surcharge on holidays paid for before the rise in value added tax imposed in his Budget became operative; if there are any practices applied by the Inland Revenue in charging value added tax in such circumstances which would justify the imposition of such a surcharge; and if he will make a statement.
§ Mr. Peter Rees,
pursuant to his reply [Official Report, 24 July 1979; Vol. 971, c.182], gave the following answer:
A number of holiday makers have written about such surcharges. If advance payment is made for a supply, VAT on that payment is normally chargeable at the rate in force when the supplier receives it. Customs and Excise would not normally regard returnable deposits paid for holidays as advance payments, but it is difficult to be certain about the legal position in any particular case, and on this occasion they will accept tax at 294W the old rate in respect of such deposits received before 18 June if the holiday operator proceeds on this basis. A holiday operator's right to surcharge his customer is a matter between the two parties, but in general traders are entitled to pass on an increase in VAT.
§ Mr. Loveridge
asked the Chancellor of the Exchequer what would be the loss to the revenue in a full year of raising the value added tax registration exemption limit to each of £12,500, £15,000 and £20,000 of applicable turnover; and how many firms would thereby be eligible for exemption in each case.
§ Mr. Peter Rees
If the deregistration limit was raised proportionately to the registration limit, about 200,000, 275,000 and 375,000 registered persons respectively would be relieved of the obligation to register, but the loss of revenue would depend upon the number who chose to do so. These numbers include traders who normally receive repayments from Customs and Excise.
Assuming that the proportion of those eligible that deregistered was similar to the proportions when the limits were raised in 1977 and 1978, it is estimated that the revenue loss would be about £15 million, £20 million and £25 million, respectively, in a full year.