Value Added Tax (Hansard, 19 July 1993)

§ Mr. Milburn
To ask the Chancellor of the Exchequer what is the estimated average household cost of adding VAT to fuel bills in each region.

§ Sir John Cope
The latest estimates of average weekly household spending on domestic fuel and power in each region are published in table 25 of the 1991 family expenditure survey. The average cost of VAT on domestic fuel bills will depend on future levels of fuel prices and on the effect of the introduction of VAT on household consumption patterns.

§ Sir Teddy Taylor
To ask the Chancellor of the Exchequer if he will seek the agreement of the European Commission that it will not seek to challenge in the European Court the opinion of Her Majesty's Government that they have full entitlement to retain zero rates for VAT after 31 December 1996; and if he will make a statement.

§ Sir John Cope
There is no need for the Government to seek such an agreement.
At ECOFIN on 24 June 1991, all member states agreed that, under transitional arrangements to last at least until the end of 1996, member states which at 1 January 1991 applied to certain goods and services zero rates for VAT in accordance with the provisions of Community law in force, would have the option of retaining them.
The sixth VAT directive 77/388/EEC, as amended by Council directive 91/680/EEC, provides that the transitional period will continue beyond the end of 1996 if there is not unanimous agreement on the definitive VAT system to operate from that date. The United Kingdom has made it clear that one of the conditions for such an agreement must be our right to retain zero rates.

§ Sir Teddy Taylor
To ask the Chancellor of the Exchequer if he will list the items subject to zero rate for30W VAT purposes which have resulted in applications to the European Court; and what was the result of such applications.

§ Sir John Cope
The following zero-rated items resulted in applications to the European Court:

(i) animal feeding stuffs, seeds, live animals yielding food for consumption (all supplies);

(ii) sewerage services and water (supplies to industry);

(iii) news services (all supplies);

(iv) fuel and power (supplies other than to final consumers);

(v) construction of buildings (supplies other than to final consumers);

(vi) protective clothing and footwear (supplies to employers).
The Court ruled that zero-rating is lawful in respect of:

private housing;

animal feeding stuffs, seeds, live animals yielding food for consumption.
However, the Court ruled that the following zero rates did not comply with Community law:

construction of buildings for industrial and commercial use and in the community and civil engineering sector;

fuel and power other than to final consumers;

sewerage services and water supplied to industry;

news services to undertakings which themselves provide services which are not zero-rated;

protective boots and helmets supplied to employers.
The United Kingdom implemented the Court's judgment with effect from 1 April 1989 in the case of construction, news services and protective clothing and from 1 July 1990 for fuel and power and water and sewerage services.