§ Mr. Ralph Howellasked the Chancellor of the Exchequer when he proposes to implement the changes in the value added tax liability of some construction industry supplies announced in his Budget; and if he will make a statement.
§ Mr. Bruce-GardyneThe Budget Statement explained that one consequence of a recent House of Lords' judgment would be the withdrawal of VAT zero-rating from a range of non-structural building alteration work. This judgment clarified the meaning of the law, but its full implementation would have meant an extra £80 million of tax on construction industry turnover. To relieve the industry of most of this burden it was decided that the zero-rating of the most commonly recognised forms of double glazing, loft and cavity wall insulation and damp-proof coursing should be continued by means of a Treasury Order. Other kinds of non-structural alteration, however, would become subject to VAT in due course and after discussions with the industry.
Since the Budget Statement, Customs and Excise has been engaged in consultations with a number of the industry's representative bodies, and have been preparing guidance on the new VAT position. I am grateful for the co-operation which the industry has extended to Customs and Excise in this important task. The work was virtually completed when, in the second half of June, a High Court judgment was given in the case of Commissioners of Customs and Excise v. Viva Gas Appliances Ltd. Unexpectedly, this judgment cast some doubt on the practical value of the criteria for distinguishing between standard-rated and zero-rated building alteration work which had been established in the House of Lords judgment and observed in subsequent judgments in the Courts. The Commissioners of Customs and Excise have now lodged an appeal against this High Court judgment to the Court of Appeal.
In the meantime, until the fresh uncertainty about the interpretation of the law in this area is resolved, it has been decided that no changes will be made to Customs and Excise current rulings and existing practice concerning the VAT liability of construction industry supplies. Implementation of the changes foreshadowed in the Budget Statement will not now take place before the present litigation is concluded, and in any event not before the beginning of 1983 at the earliest.
44WIn view of doubts about the legitimacy of relief for double-glazing existing as a result of some recent litigation, an Order to authorise the continued zero-rating of most commonly recognised forms of this work will be laid before the House before the Recess. Zero-rating currently extended to loft and cavity wall insulation and damp-proof coursing will also be continued, and it would be our intention to protect them by Treasury Order if this becomes necessary at some future date.