§ Mr. Moateasked the Chancellor of the Exchequer what would be the likely staff and cost savings if the registration limit for value added tax were to be increased to £50,000.
§ Mr. Bruce-GardyneIncreases in the VAT registration limit are restricted by the EC sixth directive on VAT to those which
maintain its value in real terms".On the basis of the retail price index the increase in the annual limit from £15,000 to £17,000 proposed in the 351W Budget was the maximum by which the limit could be increased at that time. Even if the registration limit could be raised to £50,000 taxable turnover, it is not possible to estimate the administrative saving because there is no way of knowing how many traders would avail themselves of the opportunity to deregister. It would, however, be less than proportional to the number of traders involved because the VAT system would still have to be run.
§ Mr. Moateasked the Chancellor of the Exchequer what is the cost of collecting value added tax expressed as a percentage of the revenue collected; and what are his estimates of the percentage cost of collecting value added tax from smaller traders with a turnover of less than (a) £25,000 and (b) £50,000 and for other bands of turnover for which figures might be conveniently available.
§ Mr. Bruce-GardyneI refer my hon. Friend to the reply given on 29 June to my hon. Friend the Member for Leek (Mr. Knox). It is estimated that the average cost to Customs and Excise in 1980–81 was a little under £100 in respect of each registered trader. No reliable information is available about the administration costs related to different categories of businesses; but the cost of collecting VAT from a small firm is believed to be less than the average for all businesses.
§ Mr. Moateasked the Chancellor of the Exchequer if he agrees with the finding in "Scrutiny Programme Report 1981: VAT Registration and Deregistration Procedures", on value added tax registration and deregistration procedures of 31 July 1981 that substantial staff savings could be achieved with no reduction in revenue yield by removing large numbers of small businesses from the value added tax registers; and what impediments exist to prevent his taking steps in that direction.
§ Mr. Bruce-GardyneWhen formally adopting the report of the Rayner scrutiny of VAT registration and deregistration procedures, the Government decided not to proceed with that part of the report proposing the compulsory deregistration of VAT registered businesses with turnovers below a minimum limit, even though substantial staff savings could have been achieved in Customs and Excise. This decision was based upon the belief that compulsory deregistration could have an adverse effect on small businesses, which would be contrary to the Government's policy of encouraging their growth. On balance we concluded that the disadvantages to the trading community would outweigh the advantages of the potential economies in the public sector.
§ Mr. Viggersasked the Chancellor of the Exchequer (1) what were the key assumptions and calculations used in reaching the estimate that he gave in his Budget Statement on 9 March, Official Report, c. 751, that the order that he proposed to lay before the House to continue to zero-rate double glazing, loft and cavity wall insulation and damp-proof coursing would relieve the industry of all but £10 million of the extra annual £80 million tax imposed in consequence of a recent House of Lords judgment on value added tax for building alterations.
(2) whether it remains his view that the construction industry will face additional value added tax costs from the 1981 House of Lords Judgment, Customs v ACT, after the introduction of his proposed order to continue zero-rating for certain works, of no more than £10 million per annum which he estimated in his Budget Statement.
352W
§ Mr. Bruce-Gardyne[pursuant to his reply, 8 July 1982, c. 199–200.] The figure of £10 million which my right hon. and learned Friend the Chancellor gave in his Budget Statement remains the best estimate that can be made of the revenue from the proposed changes in the VAT treatmeent of building alterations. Data suitable for calculations of this nature are limited so that the margins of uncertainty, on either side, are fairly wide, but as far as possible the key assumptions and calculations follow those described in an article in Economic Trends, March 1980. There is a copy in the Library of the House.
§ Mr. Viggersasked the Chancellor of the Exchequer whether, having regard to the decision of the High Court in the case of Customs and Excise v. Viva Gas Appliances Ltd. he still intends introducing an order in accordance with his March Budget proposal concerning value added tax and building alteration work; and if he will make a statement.
§ Mr. Bruce-Gardyne[pursuant to his reply, 8 July 1982, c. 199–200]: My right hon. and learned Friend the Chancellor explained in his Budget Statement that the purpose of the proposed Treasury order would be to preserve the VAT zero-rating of three important kinds of alteration. These were the most commonly recognised forms of double glazing, loft and cavity wall insulation and damp-proof coursing. It remains our intention that these three important kinds of alteration work should continue to be zero-rated.
§ Mr. Viggersasked the Chancellor of the Exchequer what representations he has received from representative bodies in the construction industry regarding his March Budget proposal concerning value added tax and building alterations work.
§ Mr. Bruce-Gardyne[pursuant to his reply, 8 July 1982, c. 199–200]: Some representative bodies have expressed their belief that the changes would seriously increase their members' uncertainty as to the precise scope of the tax in this area, that the £10 million estimated additional tax burden seems improbably low, that in its present depressed state the industry should not be expected to bear this additional load, and that the effect would be further to divert work to the "black economy". Some representative bodies, however, have welcomed our intention to preserve the zero-rating of double glazing and the other special kinds of work mentioned in my right hon. and learned Friend the Chancellor's Budget Statement, while others have welcomed the measure of simplification that the tax liability changes would bring.