HOUSE OF COMMONS
Fifth Standing Committee on Statutory Instruments, &c.
VALUE ADDED TAX (INPUT TAX) (AMENDMENT) (No. 2) ORDER 1995
Wednesday 7 June 1995
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The Committee consisted of the following Members:
Chairman: SIR DAVID KNOX
Abbott, Ms Diane (Hackney, North and Stoke Newington)
Alexander, Mr. Richard (Newark)
Austin-Walker, Mr. John (Woolwich)
Berry, Mr. Roger (Kingswood)
Betts, Mr. Clive (Sheffield, Attercliffe)
Biffen, Mr. John (Shropshire, North)
Bruce, Mr. Malcolm (Gordon)
Butcher, Mr. John (Coventry, South-West)
Cann, Mr. Jamie (Ipswich)
Carlisle, Mr. John (Luton, North)
Chisholm, Mr. Malcolm (Edinburgh, Leith)
Conway, Mr. Derek (Shrewsbury and Atcham)
Cope, Sir John (Northavon)
Heathcoat-Amory, Mr. David (Paymaster General)
Primarolo, Ms Dawn (Bristol, South)
Trend, Mr. Michael (Windsor and Maidenhead)
Trotter, Mr. Neville (Tynemouth)
Wardle, Mr. Charles (Bexhill and Battle)
Mr. F. A. Cranmer, Committee Clerk2 3 Fifth Standing Committee on Statutory Instruments, &c. Wednesday 7 June 1995
[SIR DAVID KNOX in the Chair]
The Paymaster General (Mr. David Heathcoat-Amory): I beg to move, That the Committee has considered the Value Added Tax (Input Tax) (Amendment) (No. 2) Order 1995 (S.I. 1995, No. 1267). I know that the Committee would be disappointed if I did not outline the contents of the order. Although it is complex, it is important. The background to the order is that, since 1 January this year, virtually all second-hand goods, works of art, collectors' items and antiques have been subject to VAT on the margin, which is the difference between the buying and selling price. That avoids double taxation on goods that have previously borne tax when new. It is good news for all businesses dealing in second-hand goods and for those who buy them. The order is part of a package of measures that implement the EC Seventh VAT directive, which deals with second-hand goods, works of art, collectors' items and antiques. The other measures were contained in the Finance Act 1995 or do not require affirmative resolution because they are not taxing provisions. Implementation of the directive marks one of the final stages in the completion of the single market. It opens up the Community to United Kingdom traders and gives traders based in this country an opportunity to exploit a wider market. That is the general background to the order, but I wish to draw attention to one or two specific issues contained in it. First, in parallel with the extension of the margin scheme of VAT accounting to a wider range of goods, the Government took the opportunity of introducing an optional simplified scheme of accounting for VAT for businesses dealing in bulk volume, low-value goods, such as stamps and coins. The new system is known as global accounting and it has been operating in the United Kingdom since the beginning of this year. It was the subject of extensive consultation last year, when customs asked interested trade bodies and their representative organisations to comment on how the system should operate in practice. On the timing, when the directive was adopted in February 1994, member states agreed that the date for its implementation should be 1 January 1995. However, the timing of the directive's adoption and the legislative timetable in this country created an awkwardness that made it desirable for the United Kingdom to introduce the changes in two phases. The most important consequences of adopting the directive were widening the range of goods eligible for the margin scheme of accounting, and the introduction of the simplified global accounting scheme, which I have just described. The Government wanted to introduce those two 4 elements at the earliest date, because the changes assisted those businesses that buy second-hand goods. Those measures were therefore, brought in on 1 January; they are optional for those businesses. Other measures are not optional. In recognition of the need for businesses to adjust some of their procedures to take into account the obligatory changes, to Government decided to introduce the other measures on Royal Assent of this year's Finance Bill. That could have been a slightly variable feast, however, so I chose the date of 1 June 1995 to give certainty to traders. That date also gave businesses a further month to make the necessary amendments to their accounting and administrative systems. I must say a few words on the United Kingdom fine art market. I have said that the directive has been broadly welcomed, but when it was being negotiated, the Government were anxious about the effect of a minimum effective rate of 5 per cent. to be applied to the import of works of art, collector's items and antiques. Against that background, agreement on the directive was delayed while we sought a deal that we could be sure protected the interests of the UK art market, which, as the Committee knows, is pre-eminent among world centres. It is a highly mobile market, facing fierce competition from outside the Community. Those negotiations were led by my right hon. Friend the Member for Northavon (Sir John Cope) who, happily, is a member of the Committee. It was very much his achievement that the United Kingdom obtained a concession to apply an effective rate of 2.5 per cent. until at least mid-1999 on those works of art, collector's items and antiques that were previously exempt at import. The London art market will be able to take advantage of the single market, as dealers and collectors throughout the Community will be able to buy their art in Britain at that concessionary rate. Lastly, there is the question of agents, including auctioneers, acting in their own names. Until now, there have been arrangements for such agents whereby, although they issued invoices describing goods in full, they accounted for VAT on their commission alone. The seventh directive removed those arrangements, so the auctioneers' scheme has been introduced. It allows auctioneers selling eligible goods to opt to account for VAT in a manner resulting in a generally similar effect. The statutory instrument forms an integral part of the wider provisions introducing the extended margin scheme of VAT accounting. While it requires affirmative resolution because it is not in itself a relieving provision, the overall effect of the package of measures is to reduce the tax burden on businesses selling second-hand goods.
Ms Dawn Primarolo (Bristol, South): The order arises from section 24 of the Finance Act 1995. We discussed the subject when we dealt with that Act, so I shall not repeat it. Section 24 inserted a new section 50A to the Value Added Tax Act 1994 which allowed for introduction of the margin scheme, which the Paymaster General has now covered. The margin scheme will replace the current second-hand goods scheme under section 32 of the 1994 Act, as it applied mainly to works of art, antiques and collector's items. During debate on the Finance Act 1995, questions were asked about the impact of the measure on the London market, which the Paymaster General has now answered. 5 The order relates to the VAT aspects of the margin scheme. We shall need to be vigilant about its impact, although it follows logically from what was agreed in the Finance Act.
Mr. John Biffen (Shropshire, North): These are gentle parliamentary occasions and I have no desire to add to the length of the proceedings. However, I am fascinated by one aspect. I have two documents. One is the Statutory Instrument itself, the other the fraternal summons from the Whip. Both bear signatures. Signatures are quite important in the sense that the order refers, in article 3, to enamels on copper, executed entirely by hand, limited to eight numbered copies. "bearing the signature of the artist", or the studio. What I find so fascinating is that the signature on the Whip is totally different from the signature on the statutory instrument. What is the status of the signature on the statutory instrument? I confess that I do not entirely recognise it as the signature of my hon. Friend the Member for Shrewsbury and Atcham (Mr. Conway). I recognise his good-natured scrawl, which is rough-hewn and imperative. When I turn to the statutory instruments the signature is neat, delicate and manicured. I cannot believe that the same hand is the author of both.
Mr. Charles Wardle (Bexhill and Battle): Does my right hon. Friend agree that it appears that both signatures on the statutory instrument are in the same hand?
Mr. Biffen: Yes, I even thought that there were illegal immigrants trying to secure passage. It is a matter of substance. Can any hand purport to represent that of my hon. Friend the Member for Shrewsbury and Atcham or is there a convention that it is the job of someone tucked away in the Treasury to falsify the hands of Minister after Minister, and Lord Commissioner of the Treasury after 6 Lord Commissioner of the Treasury? That is as valid a point as many that are batted to and fro across a Committee. I am sure that constitutionalists will be fascinated to know what is the answer to my innocent question.
Mr. Heathcoat-Amory: I cannot get to the bottom of that without examining the signatures, but I know that my hon. Friend the Minister for Shrewsbury and Atcham is subject to violent mood changes and it is possible that he signed one document in the mood in which we happily see him this afternoon, and another in a perhaps more Whip-like mode, as Lord Commissioner, which may account for the more aggressive scrawl referred to by my right hon. Friend. That is the best explanation that I can come up with on the spot, but perhaps my hon. Friend the Minister for Shrewsbury and Atcham might break the convention and give the Committee another explanation.
Lord Commissioner to the Treasury (Mr. Derek Conway): I would be delighted to help my hon. Friend, but on this occasion I must abide by the convention. When I write to my hon. Friend I always use my Christian name rather than my surname and he will probably find that the letter is signed with my Christian name.
Question put and agreed to.
Resolved. That the Committee had considered the Value Added Tax (Input Tax) (Amendment) (No. 2) Order 1995 (S.I. 1995, No. 1267).
Committee rose at nineteen minutes to Five o'clock.
THE FOLLOWING MEMBERS ATTENDED THE COMMITTEE:
Knox, Sir David (Chairman)
Cope, Sir T.
Wardle, Mr. Charles