HC Deb 26 January 1977 vol 924 cc646-9W
Dr. McDonald

asked the Chancellor of the Exchequer what would be the gain to the Exchequer in terms of additional revenue of increasing VAT from 12½ per cent. to 25 per cent. on furs, jewellery, goldsmiths' and silversmiths' wares, boats, aircraft and caravans from April 1977 to April 1978.

Mr. Robert Sheldon

It is estimated that the yield in full year 1976–77 would be about £30 million. It is not the practice to give estimates for future years.

Mrs. Millie Miller

asked the Chancellor of the Exchequer whether he will now make a statement about the outcome of recent ministerial meetings concerning the proposal for a Sixth Directive on the harmonisation of value added tax within the European Community.

Mr. Robert Sheldon

Yes. Two meetings of the Council of Ministers, on 21st October and on 16th December 1976, have been devoted to the proposed directive, which deals with the basis of assessment of value added tax in the member States, including the scope of the exemptions, but which does not call for any harmonisation of rates of tax.

Substantial progress towards agreement was made at these meetings. Final agreement has not yet been reached; discussions on a certain number of outstanding points are continuing. But if agreement is reached, the points of greatest importance for the United Kingdom would be as follows:

  1. 1. Member States would be free to continue, and to make marginal adjustments in, their existing zero-ratings of home-market supplies until the abolition of "fiscal frontiers" within the Community.
  2. 2. The zero-rating of exported goods would continue as at present; the rules for determining when chargeable services are exported, and hence zerorated, would be revised but the effect would remain substantially the same as at present; the deduction of input tax which is currently allowed for exports of exempt services would be restricted to exports outside the Community.
    3. 648
  3. 3. There would be ultimate harmonisation of the scope of exemptions within the Community, but under transitional arrangements the United Kingdom would not have to make any substantial change immediately either by way of introducing a tax charge on any existing group of exempt items or exempting any category of currently chargeable items; in particular, there would be no such change in the United Kingdom tax treatment of land and buildings, or of legal services.
  4. 4. Pending agreement on common Community arrangements, member States would be free to maintain
    1. (a) their existing turnover limits for the registration of small businesses;
    2. (b) their existing schemes for secondhand goods; and
    3. (c) their existing provisions about the blocking of input tax.

A proposal is under consideration, but has not yet been agreed, whereby a member State would be able to alter its registration limit so as to restore the value of the limit in real terms.

All these matters would be reviewed at various dates after the coming into force of the directive, with a view to progress towards harmonisation of practice.

5. No change would be necessary in the United Kingdom special schemes for retailers.

6. No additional record-keeping would be required from partlyexempt traders in the United Kingdom.

7. Changes, mainly of a technical nature, would be necessary in some aspects of United Kingdom VAT law; including the following:

  1. (a) the export of services (item 2 above);
  2. (b) the tax treatment of goods supplied on hire;
  3. (c) the value on which tax is charged if the price is not the whole consideration for the supply.

In so far as implementation of the directive would require legislation, proposals will be submitted to the House in the usual way.

The directive is intended to provide a framework for the assessment from 1st January 1978, of a contribution to the Community's own financial resources equal to the yield of VAT if it were charged at a rate of up to 1 per cent. on a harmonised basis. But it has been agreed that in calculating this basis, inputs and outputs of traders with an annual turnover below 10,000 European units of account—about £6,000—would be left out of account.