Proposal for a COUNCIL DECISION AUTHORIZING THE UNITED KINGDOM TO APPLY AN OPTIONAL MEASURE DEROGATING FROM ARTICLE 17 OF THE SIXTH DIRECTIVE (77/388/EEC) ON THE HARMONIZATION OF THE LAWS OF THE MEMBER STATES RELATING TO TURNOVER TAXES
Date: 1993-01-20
Institutions: European Commission
Subjects: United Kingdom, VAT, basis of tax assessment, inflation, tax relief, turnover

COMMISSION  OF  THE  EUROPEAN  CCfttofDNITIES 

COHC^a)7  final 

Brussels,  20 January  1993 

Proposal  for a 

COUNCIL DECISION 

AUTHORIZING THE UNITED KINGDOM TO APPLY AN OPTIONAL MEASURE 

DEROGATING FROM ARTICLE  17  OF THE SIXTH DIRECTIVE  (77/388/EEC) 

ON THE HARMONIZATION OF THE LAWS OF THE MEMBER STATES 

RELATING TO TURNOVER TAXES 

(presented  by  the  Commission) 

A 

EXPLANATORY  MEMORANDUM 

By  Council  Decision  90/497/EEC  of  24 September  1990W,  the 
United Kingdom was authorized, on the basis of Article 27(1) to 
(4) of the Sixth VAT Directive  77/388/EECC2), to apply a measure 
derogating  from  Article 17(1)  of  that  Directive  until 
31 December 1992. 

The  object  of  that  derogation,  which  is  designed  to  simplify 
collection  of  the tax,  is to  permit  deduction  of  input  tax  by 
firms that have opted for the simplified  scheme only when  it is 
paid to the supplier. Under this simplified  scheme, firms whose 
turnover  does  not  exceed  a  given  ceiling  may  defer  payment  of 
tax until receipt of the price. 

By  letter  dated  26 October  1992  and  received  by  the 
Commission's Secretariat-General  on 28 October  1992, the United 
Kingdom  Government  submitted  to  the  Commission  a  request  for 
the  previously  authorized  derogation  to  be  extended  until 
31 December  1996  and  for  the  ceiling  to  be  increased  from 
UKL 300 000 to UKL 350 000. 

In  accordance  with  Article 27(3)  of  the  Sixth  Directive,  the 
dated 
other  Member 
27 November  1992 of the United Kingdom's request. 

States  were 

informed 

letter 

by 

The United Kingdom considers the extension of the derogation to 
be amply  justified  in view of the  limited  number  of  firms that 
have  opted  for  the  simplified  scheme  and  the  favourable 
reception given it by the business organizations  concerned. 

The Commission notes that in 1990 the derogation was  authorized 
by  the  Council  with  a  turnover  limit  which  was,  at  the time, 
approximately  equivalent to ECU 410 000. In its present request 
for  authorization,  the  United  Kingdom  authorities  wish  the 
turnover  limit  to  be  increased  to  UKL 3 50 000,  which  is 

(1) OJ L 276 of 6.10.1990, p. 45. 
(2) OJ L 145 of 13.6.1977, p. 1. 

approximately 
considered by the Commission to be acceptable. 

equal  to  ECU 432 000. This  adjustment  is 

The  Commission  considers  the  derogation  from  Article  17(1)  to 
be  a  reasonable  adjustment  to  the  option  provided  for  in 
Article  10(2). 

The  Commission  considers  that  the  United  Kingdom  can  be 
authorized  to  apply  the  derogation  for  a  period  expiring  on 
31 December  1996. This further authorization does not of course 
prejudice the solution to be adopted  for the right of deduction 
under  the  proposed  22nd  VAT  Directive  on  the  VAT  scheme 
applicable to small and medium-sized businesses. 

Proposal for a 

COUNCIL DECISION 

AUTHORIZING THE UNITED KINGDOM TO APPLY AN OPTIONAL MEASURE 
DEROGATING FROM ARTICLE 17 OF THE SlXTII DIRECTIVE (77/388/EEC) 
ON THE HARMONIZATION OF THE LAWS OF THE MEMBER STATES 
RELATING TO TURNOVER TAXES 

THE COUNCIL OF THE EUROPEAN COMMUNITIES, 

Having regard  to the Treaty  establishing  the  European  Economic 

Community, 

Having  regard  to  the  Sixth  Council  Directive  (77/388/EEC)  of 
17 May 1977  on  the  harmonization  of  the  laws  of  the  Member 
States  relating  to  turnover  taxes - Common  system  of  value 
added  tax: uniform  basis  of  assessment^,  hereinafter  referred 
to  as  the  "Sixth  Directive",  and  in  particular  Article 27 
thereof, 

Having regard to the proposal from the Commission, 

Whereas,  under  the  terms  of  Article 27(1)  of  the  Sixth 
Directive,  the  Council, acting  unanimously  on  a  proposal  from 
the  Commission,  may  authorize  any  Member  State  to  introduce 
special  measures  for  derogation  from  the  provisions  of  that 
Directive  in  order  to  simplify  the  procedure  for  charging  the 
tax or to prevent certain types of tax evasion or avoidance; 

Whereas  the  United  Kingdom  was  authorized  by  Council  Decision 
90/497/EEC  adopted  on  24 September  1990<2)  in  accordance  with 
the  procedure  laid  down  in  Article 27(1)  to  (4)  of  the  Sixth 

(1) OJ L 145 of 13.6.1977, p. 1. 
(2) OJ L 276 of 6.10.1990, p. 45. 

Directive to apply  a measure derogating  from Article 17(1) of 
the said Directive until 31 December 1992; 

y 

Whereas  the  United  Kingdom,  by  means  of  a  letter  dated 
26 October 1992 
on 
28 October 1992,  requested  authorization  to  extend  the  said 
derogation until 31 December 1996; 

Commission 

received 

the 

and 

by 

Whereas  the  other  Member 
27 November 1992 of the United Kingdom's request; 

States  were  informed  on 

Whereas  this  special measure  derogating  from Article 17(1) of 
the  Sixth  Directive  forms  part  of  an  optional  system  of 
taxation  for  firms  with  an  annual  turnover  of  less  than 
UKL 350 000 based  on the third  subparagraph  of paragraph 2 of 
Article 10 of the Sixth Directive, which permits payment of tax 
to be deferred until receipt of the price; 

Whereas  the  United  Kingdom  wishes  to  increase  the  turnover 
ceiling  from  UKL 300 000  to  UKL 350 000  to  take  account  of 
inflation; 

Whereas  that  request  can  be  accepted  in  view  of  the  limited 
number of firms that have opted for this simplified  scheme and 
the limited duration of this extension; 

Whereas  the  derogation  in  question  does  not  have  a  negative 
effect  on  the  own  resources  of  the  European  Communities 
accruing from VAT, 

HAS ADOPTED THIS DECISION: 

Article 1 

By  way  of  derogation  from  the  provisions  of  Article 17(1) of 
the  Sixth  VAT  Directive,  the  United  Kingdom  is  hereby 
authorized  until  31 December 1996,  to  provide  within  an 
optional  scheme  that  enterprises  with  an  annual  turnover  of 
less than UKL 350 000 must postpone the right  of deduction of 
tax until it has been paid to the supplier. 

Article 2 

This Decision is addressed to the United Kingdom. 

Done at Brussels, 

For the Council, 
The President 

r 

ISSN 0254-1475 

COM (93) 7 final 

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ISBN 92-77-51930-4 

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