Finance Bill

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Mr. Boateng: The link that has been pointed out between this clause and clause 23, which we debated on the Floor of the House, is a real one. I return to the point that I made to the hon. Member for Torridge and West Devon: the factor in that clause will have to, and will, be taken into account in this measure. It is a relief, and this is the context in which that relief is being sought--a context that will need to be taken into account.

The right hon. Member for Fylde asked why we have not taken advantage of the opportunity to make an extra-statutory concession into a statutory one. I should have thought that he had been long enough in this game to know why. That the concession is extra-statutory is the nature of it. It is a concession and remains so.

Mr. Jack rose—

Mr. Boateng: I shall give way in a minute.

I am not quite clear about what the right hon. Gentleman would otherwise want us to do. People will have the opportunity to benefit from the extra-statutory concession. Nothing that we have done interferes with that in any way.

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Mr. Jack: In his response, the Financial Secretary has suggested that what used to be the tradition has ceased—that every year, in the Finance Bill, Ministers would be presented with a series of extra-statutory concessions that either the Revenue or Customs and Excise had considered suitable for incorporation into mainstream tax law. What I sought was an explanation, not something unprecedented.

Mr. Boateng: I understand that. That has not ceased, but remains as an extra-statutory concession. When an appropriate opportunity arises for it to be incorporated, the extra-statutory concession will be brought within the ambit of statute. The right hon. Gentleman has been around for long enough to understand that that is how it works. The concession is extra-statutory now, and people benefit from it; when an appropriate time comes to incorporate it into statute, it will be incorporated. There is nothing sinister or out of the ordinary there. The right hon. Gentleman will have witnessed that approach on many occasions.

Question put and agreed to.

Clause 22 ordered to stand part of the Bill.

Clause 24


Question proposed, That the clause stand part of the Bill.

Mr. Chope: I have some simple questions. Will the simplified arrangements apply in all circumstances permitted by the directive? Will the maximum scope for outsourcing and self-billing be allowed? Can the Financial Secretary also help us on whether the United Kingdom is pressing for changes so that methods of guaranteeing origin and authenticity, other than electronic signatures and electronic data interchange, are also permissible?

Mr. Boateng: We are in the process of inviting business to comment on the draft regulations. Customs consulted business during the agreement of the invoicing directive. That process is continuing because it will go on during the formulation of the regulatory changes. It has been very helpful to have the support of the Institute of Directors in relation to the clause. As hon. Members will be aware, the deputy head of its policy unit has written to me, applauding the progress that has been made with the invoice directive and the leading role that the Government played in that. I am mindful that the IOD wants burdens on to business to be minimised, as do we all. We shall do that by retaining the invoicing simplifications that are currently available, but also by building sufficient flexibility into the regulations to provide maximum scope for outsourcing and self-billing, and enabling the new electronic invoicing systems to be allowed as the technology develops.

As the hon. Member for Christchurch knows, the field is one in which the technology is developing. In many ways it is developing faster than the pace at which fuel technology is developing. Customs will

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continue the process of consulting business throughout the summer, through our joint-VAT consultative committee, which has proved a useful arena, as well as the e-VAT forum, during formulation of the regulatory changes. The European Commission will review the electronic invoicing provisions by 2008 and update the directive in line with technological developments. Meanwhile, Customs will identify with member states such as the UK who want to push ahead. It is always important to have a degree of flexibility when dealing with the Commission, as a number of Conservative Members will know.

We will be seeking to accept alternatives to advanced electronic signature or electronic data interchange. We are not just sitting back and waiting for things to happen; we are working closely with the sector to advance progress and retain and develop our competitive advantage.

Question put and agreed to.

Clause 24 ordered to stand part of the Bill.

Clause 25

Relief from vat on acquisition if importation would attract relief

Question proposed, That the clause stand part of the Bill.

11.15 am

Mr. Chope: I wonder whether the Financial Secretary would respond to certain representations from one company that has written to the Secretary of State for Trade and Industry on 25 April. That company makes the following point:

    ''Many millions of pounds worth of taxpayers' money is being provided to help indigenous manufacturers, particularly in the knitwear industry locally. I am amazed that the Government can then contemplate a measure which would give purchasers of, say, overseas knitwear, an advantage over those who buy within the UK.''

The point being made is that the clause will give an advantage to those who import goods, compared with those who buy goods from domestic manufacturers.

Mr. Boateng: First we had anoraks from the right hon. Member for Fylde and now we have woolly jumpers from the hon. Member for Christchurch. One wonders what it will be next. What does the hon. Member for Arundel and South Downs have in store for us? Who knows? However, the hon. Member for Christchurch makes an important and serious point, because we on the Committee must be aware of the effect that our decisions have on business people. It never comes amiss to hear specific examples of perceived impact.

I could read out the entire list of goods covered by the Value Added Tax (Imported Goods) Relief Order 1984 introduced by the previous Conservative Government, but I do not think that I should detain the Committee in that way. However, let me give just a few examples. The goods include items donated for use in charity fund-raising events, forms, tickets and labels sent to UK travel agents by overseas tourist agencies and goods to be used in the construction or

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upkeep of memorials dedicated to overseas war victims—a specialist but wide range of items. Therefore, the clause seeks to address a wide-ranging anomaly.

The clause is very modest. It recognises that way back in time there were oversights. In 1992, the term ''imports'' in VAT legislation covered all items brought into this country, whether from within or without the EU, and that meant that VAT relief was available on certain imported goods, regardless of the country of origin. With the onset of the single market, that changed. Goods brought into the UK from other member states came to be known in law as acquisitions. Unfortunately, the then custodians of the VAT legislation overlooked the need to make a corresponding change in the relief on certain imported goods, so the clause now seeks to correct that anomalous situation.

The clause does no more than that. It corrects the anomaly and puts those goods on an equal footing with zero-rated imports, as they should have been since 1993. It is a small technical change that corrects an unnecessary inconsistency in the law. It should be welcomed by everyone who wants a simpler tax system, and I believe that, on reflection, the hon. Member for Christchurch will find that his correspondent's fears about the matter are unfounded.

Mr. Chope: I am grateful to the Financial Secretary for that response. However, the correspondent was not writing to me. I have a copy of the letter with me. It was sent by a company chairman to the Secretary of State for Trade and Industry, addressing her as ''Dear Patricia.'' I am disappointed that the Financial Secretary does not have a copy of the letter and that he has not been invited by the Secretary of State to respond to it. It states:

    ''The point which concerns me is the proposal to ease the VAT regime for importers. I was particularly concerned about the cash flow advantages to importers inherent in the VAT regime many years ago and after strong representation by myself and others, the rules were changed such that importers were then at a cash flow disadvantage rather than an advantage which they had held before.

    I now see a proposal which suggests that importers could again be put at a cash flow advantage compared to those who buy from EU sources and this I find totally unreasonable and unacceptable.''

I am not sure that anything that the Financial Secretary has said will allay those concerns.

Mr. Boateng: I do not see what has changed or what the cash flow advantage is for importers. The explanatory notes state:

    ''Clause 25 inserts a new section 36A into the VAT Act. This gives a power to the Treasury to provide by order that no VAT will be payable on an acquisition of goods in the UK from another European Union Member State where VAT would be relieved on the importation of the same goods into the UK from outside the European Union.''

I really do not see what the Secretary of State's correspondent has to fear from the measure. I will certainly draw this particular exchange to the attention of the correspondence unit of the DTI, and I hope that

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the correspondent will find it of some comfort. If he does not, he can write to ''Dear Paul'', and I shall reply as best I can.

Mr. Flight: May I ask the Financial Secretary whether the clause comes as some relief to the fine art auction business in London? As I think he will be aware, the deal that we were forced to do with the EU has transferred about half of the international fine art market from London to New York. One of the problems, as far as I am aware, was the complexity of VAT, especially on objects coming from the rest of the EU into London. Will the strange semantic point about acquisitions and imports addressed in the clause be helpful to that market?

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