Finance Bill 2002: EXPLANATORY NOTE
CLAUSE 25: RELIEF FROM VAT ON AN ACQUISITION IF IMPORTATION WOULD ATTRACT RELIEF
SUMMARY
1. 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.
DETAILS OF THE CLAUSE
2. Subsection (1) of section 36A enables the Treasury to make an Order which would provide that no VAT would be payable on the acquisition of goods from another European Union country where no VAT would be payable on the importation if the goods had come to the UK from outside the European Union.
3. Subsection (2) of section 36A allows the Treasury to specify in the Order that the relief is subject to such conditions as appear to them to be necessary or expedient.
4. Subsection (3) of section 36A provides that where relief has been granted, VAT becomes payable where a condition has been breached or not complied with.
BACKGROUND
5. The UK introduced single market legislation with effect from 1 January 1993. Prior to that date, the term ?imports? covered any goods coming into the UK (no matter whether they came from a place within or outside the European Union) and VAT relief was available for certain imported goods. However, as a result of single market legislation, the term ?imports? only covered goods coming into the UK from a place outside the European Union. Goods coming into the UK from within the European Union became ?acquisitions?: VAT is not paid on the entry of the goods into the UK but is paid by the VAT registered customer on their VAT return.
6. At the time of the implementation of single market legislation, it was recognised that the relief from VAT on importation which is afforded to certain goods would also have to apply where there is an acquisition of those goods. However, no specific provision was made in UK law when the legislation was introduced. This measure is designed to correct that oversight.
7. The primary legislation will come into effect from Royal Assent, enabling a Treasury Order to be made and laid immediately after Royal Assent to come into effect 21 days later.