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Value Added Tax

Volume 115: debated on Wednesday 29 April 1987

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8.43 pm

I beg to move,

That the Value Added Tax (International Services) Order 1987 (S.I., 1987, No. 518), dated 25th March 1987, a copy of which was laid before this House on 25th March, be approved.
I think that it will be for the convenience of the House if we consider also the second motion:
That the Value Added Tax (Betting, Gaming and Lotteries) Order 1987 (S.I., 1987, No. 517), dated 25th March 1987, a copy of which was laid before this House on 25th March, be approved.

The purpose of the first order is to amend the zero-rating provisions of group 9 of schedule 5 to the VAT Act 1983 in two respects. The first is a change in liability of services supplied at events such as exhibitions, where United Kingdom treatment has been at variance with the practice in the other member states of the European Community. The second is to correct a minor technical error which occurred during the process of consolidating VAT law and this relates to the VAT liability of financial services connected with the export of goods from the United Kingdom.

The United Kingdom has recently accepted as correct and logical the view expressed by the European Community Commission, backed by all other member states, that exhibition services should be taxed in the country in which the event takes place. This has different consequences for United Kingdom and overseas exhibitors. I shall deal first with United Kingdom exhibitions. Hitherto, we had zero-rated supplies by United Kingdom traders to overseas firms participating at United Kingdom exhibitions, taking the line — now discredited—that such supplies were advertising services falling to be taxed in the country of the recipient. Those supplies were zero rated under item 5 or 6 of group 9 by virtue of the exception contained in note 4(b) and (c) to the group. Under that interpretation, the supplies fell to be taxed by the taxation authority in the country where the customer belonged.

The correct interpretation is that exhibition services fall to be taxed in the country where the exhibition takes place. This order, by deleting note 4(b) and (c) from group 9, ensures that supplies of exhibition services by United Kingdom traders to overseas exhibitors at United Kingdom exhibitions are excluded from zero rating, and thus become taxable in the United Kingdom at the standard rate.

The net revenue yield from the change will be minimal, because most of the overseas traders to whom tax will be charged will be able to apply to the Customs and Excise for refunds of the tax. At present, such refunds are limited under the eighth VAT directive to Community traders, but from 1 January next most non-Community traders will also become eligible under the recently adopted 13th VAT directive.

I now turn to exhibitions held overseas. When exhibition services are supplied by United Kingdom traders at exhibitions outside the United Kingdom, under the EC sixth directive they fall to be taxed in the country where the exhibition takes place, and should therefore be entirely relieved of United Kingdom tax by means of zero rating. The United Kingdom has always followed that line except for stands hired to United Kingdom companies. However, in the light of the new interpretation, there are doubts about the vires for this under United Kingdom law. The order is intended to place the matter beyond doubt by amending item 3 of group 9 to cover all services at exhibitions, conferences and meetings which are events similar in nature to those already catered for in that item.

I do not think that the House will wish me at this late hour to go into the details of the order, but I shall refer to the minor technical error that I mentioned earlier which the order corrects.

The original provisions of the Finance Act 1972, and the subsequent amendments contained in successive Finance Acts, were brought together in a consolidation exercise to form the VAT Act 1983. In the process the items of the exempt group dealing with finance were renumbered, but item 9 of group 9 of schedule 5 to the new Act, cross-referring to those items, was not amended to reflect the renumbering of the exempt group. Article 6 corrects that error.

I commend the order to the House.

I now turn to the second order. Certain changes in Northern Ireland social law have recently been implemented by regulations to permit the promotion of certain types of gaming, mainly bingo, which were previously illegal in the Province. The changes enable bingo to be promoted in broadly the same way as in the rest of the United Kingdom. So as to enable the VAT treatment of such gaming to be consistent throughout the United Kingdom, the minor changes to the relevant VAT law which this order proposes are necessary.

The VAT treatment of betting and gaming is governed by group 4 of schedule 6 to the VAT Act 1983, which exempts from VAT most forms of betting and gaming. The general principle, to which there are only minor exceptions, is that activities liable to excise duty do not bear VAT, and vice versa. Most activities which are not subject to excise duty are, therefore, expressly excluded from the exemption by virtue of the legal notes to item 1 of group 4, and these excluded activities are taxable at the standard rate. One such activity, and that with which the order is principally concerned, is the granting of a right to take part in a game in respect of which a charge may be made by virtue of regulations under section 14 of the Gaming Act 1968. Broadly speaking, this concerns bingo and other gaming conducted on bingo club premises for which a charge is made for participation.

The relevant VAT provision, note (1)(b) to item 1 of group 4, is tied to a provision of the Gaming Act 1968. However, the Gaming Act does not extend to Northern Ireland, where betting and gaming have traditionally been subject to separate social legislation. Thus, note (1)(b) to item 1 of group 4, as at present drafted, has no effect in Northern Ireland. Hitherto, this has not mattered because the types of game covered by the note were illegal in the Province and it was not thought necessary or desirable to provide for their standard rating when group 4 was originally enacted.

As I have indicated, the position has now changed, with the promotion of bingo having been made legal in Northern Ireland with effect from 16 February 1987. Bingo is thereafter likely to become firmly established in the Province, and, in order that the VAT treatment of such activities should be consistent with that in Great Britain, note (1)(b) to group 4 needs to be widened.

The VAT revenue yield can only be speculative at the moment, since it will depend on the extent to which bingo promoters take advantage of the new social law provisions, but it is unlikely to be significant. It is not expected to exceed £1 million in a full year and will clearly fall short of this figure in the current financial year.

The interval between the implementation date of this order and the slightly earlier implementation date of the relevant Northern Ireland social law provisions has negligible significance in VAT revenue terms since it reflects the time needed by prospective bingo promoters to obtain the necessary authority to conduct bingo operations. In practice, therefore, legal bingo operations are not expected to take place much before the operative date of this order.

In conclusion, I should add that a parallel change has already been made in respect of bingo duty in last year's Finance Act.

I commend the order to the House.

Question put and agreed to.


That the Value Added Tax (International Services) Order 1987 (S.I. 1987, No. 518), dated 25th March 1987, a copy of which was laid before this House on 25th March, be approved.

Value Added Tax


That the Value Added Tax (Betting, Gaming and Lotteries) Order 1987 (S.I., 1987, No. 517), dated 25th March 1987, a copy of which was laid before this House on 25th March, be approved.—[Mr. Brooke.]

Norfolk And Suffolk Broads (Re- Committed) Bill


That the Order for Committee be discharged and that the Bill, as amended in the Select Committee, be re-committed to a Standing Committee.—[Mr. Neubert.]