HC Deb 31 July 1998 vol 317 cc660-2W
Mr. Gibb

To ask the Chancellor of the Exchequer what is the estimated annual lost revenue resulting from VAT avoidance from schemes using the VAT grouping concessions. [53721]

Dawn Primarolo

[holding answer 30 July 1998]: There is no reliable estimate of the VAT loss arising from exploitation of the grouping facility for tax avoidance purposes. The revenue cost of the normal operation of the facility has been estimated at £400 million.

Mr. Whittingdale

To ask the Chancellor of the Exchequer (1) what estimate his Department has made of the additional revenue which will be raised from(a) the education sector, (b) the health sector, (c) the property industry, (d) the banking sector, (e) the financial services industry, (f) the insurance industry and (g) charities as a result of the restriction of VAT group treatment to fully-taxable corporate bodies; [54693]

(2) what amount of additional revenue will be raised by the Government's proposals to restrict VAT group treatment to fully-taxable corporate bodies; [54840]

(3) what estimate his Department has made of the effect on customer charges for financial services products of the restriction of VAT group treatment to fully-taxable corporate bodies; [54701]

(4) what basis the estimated revenue cost of £400 million of current VAT grouping structures is calculated; [54819]

(5) what research the Treasury has carried out since 1 May 1997 on the revenue cost of current VAT grouping structures; [54837]

(6) what estimate his Department has made of the (a) compliance costs and (b) restructuring costs resulting from the restriction of VAT group treatment to fully taxable corporate bodies. [54832]

Dawn Primarolo

No reliable or up-to-date estimates exist of the costs associated with the VAT grouping facility, either for business or the Exchequer. It is one of the main purposes of the consultation process that the extent of such costs, and the associated revenue implications, should be established. As part of this process Customs and Excise will be meeting representatives from a number of key business sectors in the autumn to discuss, in detail, these and other aspects of the proposal to restrict the VAT grouping facility.

Mr. Whittingdale

To ask the Chancellor of the Exchequer what are the rules relating to VAT group treatment in each other member state of the European Union. [54694]

Dawn Primarolo

VAT grouping facilities exist in eight of the fifteen member States of the EU: Austria, Denmark, Finland, Germany, the Netherlands, the Republic of Ireland, Sweden and the United Kingdom. Germany and the Netherlands operate systems which are obligatory and which encompass the entire corporate group. In Sweden and Finland grouping is restricted to the financial sector. The Danish facility is broadly similar to the current system operated in the UK. VAT grouping in the Republic of Ireland is granted at the absolute discretion of the Revenue Commissioners.

Mr. Whittingdale

To ask the Chancellor of the Exchequer what discussions have taken place with other European Ministers about the harmonisation of VAT rates; and if he will make a statement. [54633]

Dawn Primarolo

There have been no recent discussions in ECOFIN about the harmonisation of VAT rates. However, the European Commission's suggestion for an optional reduced rate of VAT for some local, labour-intensive services was discussed at February's ECOFIN.

Any change to the EC VAT system requires the unanimous agreement of member states. The Government, while supportive of efforts to simplify and modernise the current European Community VAT system, are opposed to further harmonisation at the Community level.

Mr. Whittingdale

To ask the Chancellor of the Exchequer (1) what estimate his Department has made of the level of abuse of the current rules on VAT grouping in order to avoid tax; and how much tax he estimates to have been lost as a result of this abuse; [54831]

(2) how much of the revenue raised by the Government's proposals to restrict VAT group treatment to fully-taxable corporate bodies will come from closing down tax avoidance schemes. [54839]

Dawn Primarolo

There is no reliable estimate of the VAT loss arising from exploitation of the grouping facility for tax avoidance purposes. The revenue cost of the normal operation of the facility has been estimated at £400 million.

Mr. Whittingdale

To ask the Chancellor of the Exchequer what discussions he has had with other European Finance Ministers about the proposed changes to the VAT grouping rules. [54695]

Dawn Primarolo

No such discussions have been held.

Mr. Whittingdale

To ask the Chancellor of the Exchequer (1) what estimate his Department has made of the number of companies which because of regulatory requirements cannot restructure their organisation to avoid being affected by the proposed restriction of VAT group treatment to fully-taxable corporate bodies; [54696]

(2) what estimate his Department has made of the number of companies which will be able to restructure their organisation to avoid being affected by the proposed restriction of VAT group treatment to fully-taxable corporate bodies; [54697]

(3) how many companies, broken down by sector, will be affected by the Government's proposals to restrict VAT group treatment to fully taxable corporate bodies. [54838]

Dawn Primarolo

There are no detailed estimates as to the number of companies which would be affected by the proposal to restrict VAT grouping. The main purposes of the consultation process are to give businesses the opportunity to comment in detail on the potential implications that such a proposal would have for them and to obtain better information about the numbers and types of companies affected.