HC Deb 29 January 1987 vol 109 cc383-4W
43. Mr. Heddle

asked the Chancellor of the Exchequer when he expects that the European Court's decision in respect of European Economic Community sixth directive on value added tax will be known; and if he will make a statement.

Mr. Brooke

The position has not changed since my answer to my hon. Friend on 4 November at column 335.

51. Mr. David Atkinson

asked the Chancellor of the Exchequer if he will make a statement on the outcome of his negotiations with the European Commission on the value added tax threshold.

Mr. Brooke

The Commission has proposed a new directive on VAT and small and medium enterprises which makes reference to the VAT threshold. Discussion on this directive started in the financial questions group of the Council in November and will continue under the Belgian presidency. It is not yet possible to forecast when and in what form the directive will be agreed.

Mr. Neil Hamilton asked the Chancellor of the Exchequer (1) what would be the cost of extending value added tax bad debts relief (a) to all debts eligible for relief tinder section 130(i) of the Income and Corporation Taxes Act 1970 and (b) to all unsatisfied judgment debts, indicating in each case the extent to which the cost would be affected by the proposals in his consultative document, "Value-added Tax: Small Business review", to permit smaller traders to account for value-added tax on a cash basis;

(2) what information he has concerning the increase in value added tax revenue which would occur if the standard method of reckoning gross takings were abolished as proposed in his consultative document, "Value-added Tax: Small Business Review"; and what is the number and size of traders who would be affected.

Mr. Brooke

[pursuant to his replies, 26 January 1987, c. 185]: There is no reliable basis for accurately forecasting the cost of comprehensive relief for bad and doubtful VAT debts. The best projection that can be made suggests an additional revenue cost well in excess of £100 million a year. In addition it is estimated that up to 200 extra Customs and Excise staff would be necessary to provide a reasonable security against abuse and fraud.

Representations received from respondents to the recent consultation document suggest that, if the proposal to abolish the standard method of reckoning gross takings for users of the VAT special retail schemes were to be implemented, the benefit to the revenue could be in excess of £25 million a year. The proposal would affect only those, mainly large, traders who provide self-financed credit facilities. It would not affect the wholly cash-dealing business.

The consultative document proposal to allow certain small traders to account for VAT on a cash basis would have only a minimal effect on the revenue cost of bad debt relief.