§ Mr. Brightasked the Chancellor of the Exchequer what is his policy towards the number of late payments of value added tax by a company which will be necessary (a) in a year, (b) in a three-year and (c) in a 10-year period to trigger a penalty by Her Majesty's Customs and Excise.
§ Mr. BrookeUnder section 19 of the Finance Act 1985 a company which fails twice within 12 months to pay value added tax by the due date will be liable to a surcharge for each subsequent default until such time as a 12 month period free of default has elapsed.
§ Mr. Brightasked the Chancellor of the Exchequer what are the implications of the sixth Exchequer directive on value added tax for the proposed compulsory de-registration of businesses below the turnover threshold.
§ Mr. BrookeIt is not clear whether any proposal to refuse registration to businesses below the registration threshold would be compatible with the European Community sixth VAT directive. In considering such a proposal we would therefore need to discuss the position with the EC Commission and our Community partners.
§ Mr. Brightasked the Chancellor of the Exchequer whether he will consider, in the light of responses to the Customs and Excise consultation document, "VAT: Small Business Review" issued in October, reducing the period for which small firms have to keep value added tax records from six to three years.
§ Mr. BrookeAs the consultation document explains, Customs and Excise are to appoint an independent consultant to review their VAT record keeping and preserving requirements with the following terms of reference
To consider the effect on small businesses of the requirement to preserve VAT records for a maximum of six years; the records that need to be covered by these requirements; and to make recommendations consistent with Customs and Excise's needs in respect of the revenue control of the tax.The Keith committee, which examined the enforcement powers of the revenue departments, reommended that the maximum period for which Customs and Excise can require VAT records to be preserved should be extended from three to six years. However, within the maximum period there is scope for the exercise of discretion as regards earlier disposal of ancillary records. In this connection I refer my hon. Friend to the statement made 396W by my right hon. Friend, the Member for Brentwood and Isleworth (Mr. Hayhoe) during the debate in Standing Committee B on the 1985 Finance Bill on 21 May 1985 at column 200.
§ Mr. Brightasked the Chancellor of the Exchequer what reactions have come fom organisations representing small businesses to the default provisions set out in the Customs and Excise consultation document, "V.A.T.: Small Business Review", issued in October.
§ Mr. BrookeTo date, none.
§ Mr. Brightasked the Chancellor of the Exchequer why he proposes that small businesses joining the proposed system of annual value added tax returns with payments on account, as set out in the consultation document, V.A.T.: Small Business Review, in October, should be compelled to make nine successive monthly payments on account.
§ Mr. BrookeThe payment of the anticipated tax liability by means of nine payments on account with an additional final adjusting payment would enable traders to transfer more easily from the existing quarterly to the proposed annual accounting system; would protect revenue flows; and is in line with many commercial arrangements for the payment of regular financial liabilities. The proposal will, of course, be brought under review in the light of reactions to the consultation exercise.
§ Mr. Brightasked the Chancellor of the Exchequer what criteria the Customs and Excise envisage applying to calculate anticipated changes in a small business's turnover and trading levels for the purposes of estimating its annual value added tax assessment as outlined in the consultation document, V.A.T.: Small Business Review, issued in October.
§ Mr. BrookeThe consultative document explains that the preceding year's net tax liability would be used as the base line and that it would be necessary to allow for anticipated changes, in turnover, trading and inflation. Detailed decisions on the criteria to be applied in making such adjustments must await the outcome of the consultation exercise.
§ Mr. Ashdownasked the Chancellor of the Exchequer if he will give the total number of schedule D tax payers who are also registered with the Customs and Excise for value added tax purposes; and if he will make a statement.
§ Mr. BrookeI regret that the records are not maintained in this form. The VAT registration records and the Inland Revenue schedule D records are not cross-referred. Registration for VAT is of the "person", that is, sole proprietor, partnership, corporate body and so on, and not necessarily the individual. Schedule D tax is normally levied separately on the individual. Meaningful cross-referencing between the two sets of records is, therefore, not possible.
§ Mr. Ashdownasked the Chancellor of the Exchequer if he will give the latest available figures for the total number of businesses registered with the Customs and Excise for value added tax purposes.
§ Mr. BrookeAt 6 October 1986 the total number of persons registered for VAT was 1,489,020.
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§ Mr. Nicholas Bakerasked the Chancellor of the Exchequer if he will make it his policy to zero rate for value added tax purposes building alterations works for the disabled.
§ Mr. BrookeZero-rating already extends to a wide range of building alterations of significance for the disabled. More general reliefs in favour of the disabled have been considered previously, and ruled out on grounds of revenue cost; but I shall bear my hon. Friend's suggestion in mind.