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Volume 82: debated on Monday 1 July 1985

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asked the Chancellor of the Exchequer what assessment he has made of the effect on small businesses of the current value added tax exemption limit.

The effect of the VAT exemption limit on small businesses is kept under regular review. A proper balance is required between the need to contain the administrative costs of the tax for both traders and Customs and Excise on the one hand and, on the other, the need to maintain the yield of tax and minimise distortion of competition between those who are registered for VAT and those who are not. Increases in the limit are restricted by the EC sixth VAT directive to those amounts which maintain its value in real terms. The Government consider that the level set in the directive is too low; the matter has been raised in the European Council and the Government will continue to press this point.