§ Baroness Byfordasked Her Majesty's Government:
When they set up the system for issuing horse passports, what consideration they gave to smaller organisations not registered for VAT and consequently not able to reclaim VAT on expenditure on items used to prepare the passports; and [HL1828]
Whether they will arrange for VAT exemption on the materials used in the production of horse passports undertaken by organisations too small to be registered for VAT; and [HL1829]
Whether they will arrange for private horse owners to reclaim VAT on horse passports to bring them into line with commercial owners; and [HL1830]
Whether they will instruct Customs and Excise to exempt horse owners who have not yet had their 18th birthday from paying VAT on horse passports; and [HL1831]
Whether horse passports, which remain the property of the Passport Issuing Organisation, are covered by VAT Notice 700, 4.4, in which supply of goods is defined as the passage of exclusive ownership to another person; and [HL1832]
Whether horse passports are covered by VAT Notice 700, 4.5 when they are neither hired nor lent, do not confer a right and are considered by the Department for Environment. Food and Rural Affairs not to be a licence. [HL1833]
§ The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey)I understand from the Department for Environment, Food and Rural Affairs that a decision to apply to become a passport-issuing organisation is a commercial and operational matter for the organisation making the application. VAT registration was not specifically considered during the consultation exercise carried out regarding the proposal to extend passports to all horses, nor was it raised in any of the responses to that consultation.
93WAIn respect of VAT there are two issues: the supplier of the passports and the horse owner. For the supplier, Customs and Excise's Public Notice 700 paragraph 4.4 explains what is meant by a supply of goods for VAT purposes. Paragraph 4.5 of that notice explains what is meant by a supply of services. Issuing a horse passport is regarded as a supply of services for VAT purposes. Long-standing formal agreements with our European partners allow us to keep our zero rates as they currently stand but do not allow us to extend them or introduce new ones. Article 13 of the sixth VAT Directive lays down mandatory exemptions and does not permit exemption for this type of supply. We are therefore unable to introduce any new VAT relief either for the issuing of horse passports or for the materials used in their production.
For horse owners these European agreements also mean that VAT incurred on purchases can only be reclaimed when it relates to taxable business activities. Private owners will therefore be unable to reclaim any VAT incurred in purchasing a horse passport.