§ Sir David Price
asked the Chancellor of the Exchequer if he will join the German Minister of Finance in opposing the European Community 12th directive on value added tax.
§ Mr. Hayhoe
After careful consideration of representations made by trade bodies and others in response to a comprehensive consultation exercise carried out by Customs and Excise, the United Kingdom Government intend to take the following approach to this draft directive.
The principle of the draft 12th directive, that deduction of input tax should be disallowed on certain expenditure which may not be genuinely for business purposes, was accepted by the United Kingdom when it agreed to the sixth directive on VAT in 1977. The Government, however, believe that the blocking rule is crude and should be used only to remedy really significant abuse or administrative complications. The United Kingdom could accept a directive which made obligatory the blocking of input tax deduction on those items where it already applies in the United Kingdom, that is cars and business entertainment—except for overseas clients—but nothing more.