ARCHIVES HISTORIQUES 
DE LA COMMISSION 
 
 
 
COLLECTION RELIEE DES 
DOCUMENTS "COM" 
 
 
 
 
COM (85) 267 
 
 
 
Vol. 1985/0 119 
  
 
Disclaimer  
Conformém ent au règlement (CEE, Euratom) n° 354/83 du Conseil du 1er février 1983 
concernant l'ouverture au public des archives historiques de la Communauté économique 
européenne et de la Communauté européenne de l'énergie atomique (JO L 43 du 15.2.1983, 
p. 1), tel que modifié par le règlement (CE, Euratom) n° 1700/2003 du 22 septembre 2003 
(JO L 243 du 27.9.2003, p. 1), ce dossier est ouvert au public. Le cas échéant, les documents 
classifiés présents dans ce dossier ont été déclassifiés conformément à l'article 5 dudit 
règlem ent. 
In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983 
concerning the opening to the public of the historical archives of the European Econom ic 
Communit y and the European Atom ic Energy Communit y (OJ L 43, 15.2.1983, p. 1), as 
amended by Regulation (EC, Euratom) No 1700/2003 of 22 September 2003 (OJ L 243, 
27.9.2003, p. 1), t his file is open to the public. Where necessary, classified documents in this 
file have been declassified in conformity with Article 5 of the aforementioned regulation.  
In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom  1. 
Februa r 1983 über die Freigabe der historischen Archive der Europäischen  
Wirtschaftsgemeinschaft und der Europäischen Atomgem einschaft (ABI. L 43 vom  15.2.1983,  
S. 1), geändert durch die Verordnung (EG, Euratom) Nr. 1700/2003 vom 22. Septem ber 2003  
(ABI. L 243 v om 27.9.2003, S. 1), ist diese Datei der Öffentlichkeit zugänglich. Soweit  
erforderlich, wurden die Verschlusssachen in dieser Datei in Übereinstimmung mit Artikel 5  
der genannten Verordnung freigegeben.  
COMMISSION OF THE EUROPEAN COMMUNITIES
C 0 M Î8 5 ) 26 7  -final 
Brussels, 4  June 1 9 8 5
C O M M I S S I O N  C O M M U N I C A T I O N  T O  T H E  C O U N C I L
Application of Article 2 7  (1) to (4) of the Sixth Council 
Directive of 1 7  M a y  1977 o n  value added tax to a  request 
tor derogation submitted b y the United K in g d o m  G overnm ent
C O M (85) 2 67 final

C om m ission C om m unication to the Council concerning the application of 
Article 2 7  of the Sixth Council Directive of 1 7  M a y  1977 on value added 
tax (1) to a  request for derogation submitted b y  the United K in g d o m
G overnm ent
1. O n  1 5  M arch  1985, the United K in g d o m  G overnm ent informed the 
C om m ission, pursuant to the above provisions, of its intention 
to introduce a  m easure derogating from  the Sixth Directive.
2. This derogation, limited to a  period of tw o  years, is intended 
to avoid tax evasion b y  introducing a  system for the application 
of V A T  in cases w here the marketing structure of certain firms 
is based upon the sale of their products to unregistered re­
sellers.
3. T h e C om m ission informed the other M e m b e r States, by letter dated 
1 2  April 1985, of the request submitted by the United K ingdom  
Government.
4. In accordance with Article 27(4) of the Sixth Directive, the 
Council's decision will be deem ed to have been adopted if, 
within tw o  m onths of the other M e m b e r States being informed, 
as described at 3  above, neither the C om m ission nor any M e m b e r 
State has requested that the matter be raised b y  the Council.
5. Provided that the derogation proposed b y  the United K in g d o m  
G overnm ent is restricted to the measures mentioned in para­
graph 2  of this Com m unication, the C om m ission does not intend 
to ask for the matter to be raised b y  the Council.
6. T h e  C om m ission requests the Council to publish the text of 
paragraphs 1  to 3  of this C om m unication in the Official 
Journal together with its decision.
A n n ex  1
(1 ) O J  N o L 145, 13.6.1977

ANNEX
SIXTH VAT DIRECTIVE : NOTIFICATION BY THE UNITED KINGDOM OF A SPECIAL
MEASURE UNDER ARTICLE 27 OF THE SIXTH VAT DIRECTIVE (77/388/EEC)
1. Article 27 provides for Member States to introduce special measures to prevent 
certain types of tax evasion or abuse. Such measures must be authorized by the Council 
after notification to the Commission under Article 27.2. The United Kingdom hereby 
notifies the Commission that it needs to introduce, as a matter of urgency, such a speci 
measure as detailed below.
2. In the United Kingdom certain companies, in the field of cosmetics for example, 
soli their products solely to retail dealers who are not required to be registered for 
VAT and are therefore outside the tax net. While these companies and dealers do not 
seek to evade payment of tax, the effect of their marketing structure is that tax on 
the value added by the dealer to the final consumer is avoided. Other companies selling 
similar products in direct competition and selling through normal registered retail outlets 
are therefore at a competitive disadvantage because the price of their products to the 
final consumer bears additional VAT.
- 5 "  Until 1981, the Commissioners of Customs and Excise had power to prevent this 
avoidance of tax on the retail margin, by requiring sales to unregistered individuals, 
for onward resale by them, to be taxed on their retail value. The power was contained 
in paragraph 2 of Schedule 3  to the Finance Act 1972, as amended by the Finance Act 
1977. The provisions were notified to the Commission in 1977 under paragraph 5 of 
Article 27 as an existing special measure of the type referred to in paragraph 1  of 
Article 27.
4. The text of the provisions notified to the Commission was further amended by 
Section 14(1) of the Finance Act 1981 and in their judgment of 13 February 1985 in 
the case of Direct Cosmetics Ltd v The Commissioners of Customs and Excise (Case 
5/84), the European Court of Justice found that the 1981 amendment constituted a new 
special measure requiring notification to the Commission under paragraph 2 of Article 
27.
5. The provisions, the subject of this notification, are now in the Value Added Tax
Act 1983, at paragraph 3 of Schedule 4 to the Act which states:

"3. Where -
(a) the whole or part of a business carried on by a taxable person consists 
in supplying to a number of persons goods to be sold whether by them 
or others, by retail, and
(b) those persons are not taxable persons,
the Commissioners may by notice in writing to the taxable person direct that the value
of any such supply by him after the giving of the notice or after such later date as
he-may be specified in the notice shall be taken to^its open market value on a sale by 
retail."
6. The United Kingdom submits that this special measure is fully in accordance with 
the provisions of Article 27.1. Its use will be confined to companies in a substantial 
way of business operating in the manner described. Such companies sell products which 
are normally distributed to the market place through VAT registered retailers and which 
thus bear an additional burden of tax which also places them at a competitive disadvantage. 
The measure will not be applied to other wholesalers selling to unregistered retailers.
7. The United Kingdom further submits that it requires the special measure to be
in force for a period of two years. During that period the United Kingdom undertakes
to examine its national law in relation to valuation for VAT purposes to determine whether 
the objectives of the special measure may be achieved by other means fully consistent 
with the provisions of the Sixth VAT Directive, possibly by alignment with Article 4.4 
thereof.