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Value Added Tax

Volume 885: debated on Thursday 30 January 1975

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asked the Chancellor of the Exchequer if he will consider making his VAT regulations retrospective to people building their own homes, where the goods were purchased before his November announcement but their homes were not completed.

We considered carefully and sympathetically the operative date of the relief we are introducing under Clause 3 of the autumn Finance Bill, but we concluded that the provision should not have retrospective effect.

Does my hon. Friend agree that do-it-yourself builders need great encouragement from the Government as they are doing a first-class job? Will he make an assessment of the likely cost of such a concession to those affected by my Question? They are under considerable financial pressure, and any help that we can give them will be greatly welcomed.

I thoroughly endorse the sentiments expressed by my hon. Friend. The reason why the relief was not given retrospectively had nothing to do with cost. It was merely that if we had done it in that way it would have been extremely difficult to preserve equity between individuals who started building their houses as long ago as April 1973. It would have been an impossible task for them to produce invoices going back that far.

Will my hon. Friend say how many people in total have been caught in this VAT trap while building their own homes? Is he aware that this is particularly important in rural areas, where a greater percentage of people become involved in this kind of activity? Cannot the Government be generous in these circumstances and give the people concerned a refund of the tax they pay?

I am afraid that I cannot give my hon. Friend the statistic for which he asks. I take his point that people in rural areas are particularly involved in extremely worthwhile activity of this sort. The concession is to some extent retrospective in that it is not confined to people who started building their houses after the date on which my right hon. Friend announced the concession. Anyone who is receiving supplies that would otherwise have been taxable after that date, even in respect of a house that had already been started, will receive the relief.

While I recognise the difficulties of conceding to the pressures that the Minister's hon. Friends are putting on him, is not the hon. Gentleman aware that the Government have no one to blame but themselves if they are put under pressure to introduce further retrospection bearing in mind the extensive retrospective effect of a great many of their measures in the current Finance Bill?

It is a little cool for that sort of comment to come from a member of the Conservative Party which suggests that we should be giving greater relief in this respect. Do-it-yourself builders are paying value added tax only because it was imposed by the previous Conservative Government. Relief is now being extended by my right hon. Friend.


asked the Chancellor of the Exchequer what consideration has been given to relieving the bloodstock industry of value added tax.

At a meeting which I had with the Bloodstock VAT Committee last April, I explained the difficulties involved in contemplating a concession falling in the area of discretionary expenditure, but said that I would consider any "hard" evidence which the committee might put forward in support of its case for the zero rating of blood-stock. Although the further evidence produced did not advance the committee's case, I understand that the committee has been reconstituted to represent wider interests and that further representations are going to be made.

While I am grateful for what the Minister has said and for the sympathy with which he is viewing this subject, may I press upon him the representations that have been made to me by trainers and owners in the Lambourn area of my constituency to the effect that the present rate of VAT is doing grave damage to the bloodstock industry? The industry is a vitally important foreign exchange earner. Even if the Minister cannot agree to zero rating, is he aware that at least some relief would make a great deal of difference?

I am obliged to the hon. Gentleman for the moderate way in which he has put his representations. I am sure he will acknowledge that the rate of value added tax bearing on the blood-stock industry is lower now than it was before. The officials of Customs and Excise have been looking into the technical matters which might give some marginal relief. I hope that it might be possible to make some progress in that direction. I cannot give the hon. Gentleman any further encouragement.

Is the Minister aware that a far greater threat to the bloodstock and racing industry lies in the capital transfer tax in the present Finance Bill? Has he given thought to a future situation in which all racehorses will be owned by the State, or does he have any other plans for ensuring the continuation of the racing industry?

As the hon. Gentleman well knows, the measures involving the capital transfer tax will be discussed in great detail in Committee on the Finance Bill. Possibly that discussion is better left to those proceedings.

The Minister knows that I wrote to him about this matter last month. Does he accept that the interpretation of VAT by the Treasury is much more rigid than that by the tax authorities in France, which consequently benefits our racing and breeding competitors in France? Does he realise that this greatly affects an industry already beset with financial problems? Will he go a little further than he has gone today—although I am glad that he will consider the matter again—bearing in mind that the industry in total is contributing approximately £650 million to the Treasury?

I am well aware of the considerations that the hon. Gentleman puts forward. He will also recognise that there are many wider considerations that have to be taken into account. There are many other powerfully-argued cases for relief. This is essentially an element of discretionary expenditure. We are receiving powerful representations from all forms of sport, from the living theatre, from charities and from other organisations. It is a question of establishing priorities for relief.