§ Mr. MitchellTo ask the Chancellor of the Exchequer if he will make a statement on(a) the legislative base for, (b) the extent of and (c) the duration of (i) full, (ii) temporary and (iii) transitional exemptions in respect of VAT. [64824]
§ Dawn PrimaroloThe legislative base for VAT exemptions and zero rates, in terms of EC law, is the Sixth VAT Directive.
Most of the UK's VAT exemptions, such as finance, insurance, most leasing of property and betting and gaming, are part of the normal VAT system, and there is no expiry date set down in the Sixth Directive. The same is true of the zero rate for exports outside the European Community, and associated supplies.
Under the so-called 'transitional' arrangements of the Sixth VAT Directive, the UK is also able to:
zero rate social items such as food, public transport, books, newspapers and children's clothing (Article 28(2)(a) of the Directive); andexempt certain transactions, the main categories being burials, cremations, and building land (Article 28 (3)(b) of the Sixth VAT Directive).In addition, there are a number of technical zero rates on goods dispatched (exported) from the UK to other EC member states.
It was originally envisaged that the transitional arrangements would last until 31 December 1996, when they would be replaced by a 'definitive' (Common) VAT system. However, the Commission has not yet put forward legislative proposals for key elements of the replacement Common VAT system. Until they do so, and they are unanimously agreed by member states, the transitional arrangements will continue automatically.
§ Mr. MitchellTo ask the Chancellor of the Exchequer if he will list, for the latest available year, the revenue obtained from VAT charges on(a) building alterations and (b) civil construction; and when VAT was introduced for each. [64809]
§ Dawn PrimaroloInformation in the form requested is not available. However the breakdown of VAT receipts relating to buildings and construction can be provided.
287WRevenue in 1997–98 from house repairs, improvements and maintenance is estimated to be £1.5 billion and that on all other building work, apart from that which qualifies for zero-rating, to be £1.1 billion.
VAT was introduced for building alterations in 1984 and for construction of new commercial buildings in 1989.
§ Mr. MitchellTo ask the Chancellor of the Exchequer when the European Commission(a) gave notice of and (b) commenced, infraction proceedings against Her Majesty's Government concerning the zero rating, or exemption from VAT of (i) building alterations and (ii) construction works; on what legal instrument such actions were based; and what papers relating to such proceedings have been made publicly available. [64810]
§ Dawn PrimaroloThe European Commission gave notice of infraction proceedings by the issue of a reasoned opinion to the UK Government on 4 September 1984. On 13 September 1985 the European Commission made an application to the European Court of Justice, pursuant to Article 169 of the EEC Treaty (as the Treaty was then known), alleging that the UK had breached Article 28(2) of the Sixth Directive. (Article 28(2) provides for the continuation of those zero rates which satisfy the conditions contained in the Second Council Directive of 1967.)
A copy of the report for the hearing of the case (416/85) before the European Court of Justice on 15 September 1987 was placed in the Library of the House of Commons on 23 July 1987. The opinion of the Judge Advocate (2 December 1987) and the judgment of the Court (21 June 1988) were published in European Court Reports, the formal law reports of the European Court of Justice.
New VAT law was introduced in the Finance Act 1989 to reflect the judgment of the European Court of Justice. The construction of commercial buildings became standard rated but dwellings and residential buildings continued to benefit from zero-rating.
The infraction proceedings did not apply to alterations to existing buildings which have been standard rated since 1984.