CELEX: 51997PC0064
Language: en
Date: 1997-02-27
Title: Proposal for a COUNCIL DECISION AUTHORISING 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 MEMBERS STATES RELATING TO TURNOVER TAXES

COMMISSION OF THE EUROPEAN COMMUNITIES
                                      Brussels, 27.02.1997
                                      COM(97)64 final
                       Proposal for a
                   COUNCIL DECISION
 AUTHORISING 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)
 ---pagebreak---  ---pagebreak---                             EXPLANATORY MEMORANDUM
By Council Decision of 23 July 19871, the United Kingdom was authorised, on the
basis of Article 27(1) to (4) of the Sixth VAT Directive2, to apply a measure
derogating from Article 17(1) of that Directive until 30 September 1990. By Council
Decisions of 24 September 1990 (90/497/CEE)3 and of 15 February 1993
(93/111/EEC)4 further extension of the derogation was permitted until 31 December
1992 and until 31 December 1996, respectively.
The derogation forms part of an optional system of taxation for undertakings whose
annual turnover does not exceed a given ceiling (£350.000 at the moment) in which tax
is accounted for on the basis of cash paid and received (cash accounting). This system
is partly based on the third subparagraph of Article 10 (2) of the said Directive, which
permits payment of tax to be deferred until receipt of the price.
The object of this 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.
By letter registered by the Commission's Secretariat-General on 19 November 1996,
the United Kingdom Government submitted to the Commission a request for the
previously authorised derogation to be extended until 31 December 2000 and for the
ceiling to be increased from £350.000 to £400.000. Differing from the previous
requests, the United Kingdom Government seeks also authorisation for a derogation
from the provisions of Article 22(4) and (5), as it believes that the cash accounting
scheme is rather based on a derogation from these provisions than on the provisions of
Article 10 (2), which has partly been the basis for the simplified scheme up to now.
In accordance with Article 27(3) of the Sixth Directive, the other Member States were
informed by letter dated 18 December 1996 of the United Kingdom's request.
The United Kingdom considers the extension of the derogation to be amply justified in
view of the number of firms that have already opted for using the simplified scheme
and the favourable reception given to it by the trade and professional bodies
concerned.
 The Commission notes that in 1993 the derogation was authorised by the Council with
 a turnover limit which was, at the time, approximately equivalent to ECU 432.000. In
 its present request for authorisation, the United Kingdom authorities wish the turnover
 limit to be increased to £400.000, which is approximately equal to ECU 541.000. This
 adjustment is considered by the Commission to be acceptable.
 1
    OJNoL213. 4.8.1987, p. 40
 2
   OJ No L 145, 13.6.1977, p. 1, as last amended by Directive 96/95/EC, OJ No L 338, 28.12.1996, p.
 89
 3
    OJ No L 276, 6.10.1990, p. 45
 4
    OJ No L 43, 20.2.1993, p. 46
 ---pagebreak--- The United Kingdom Government also requests for a derogation from Article 22 (4)
and (5), indicating that a derogation from these provisions is a more appropriate
footing, as the existing scheme does not seek to change the time of the chargeable
event.
The Commission would like to point out that the third subparagraph of Article 10 (2)
permits Member States to fix, for certain transactions of certain categories of taxable
persons, a moment when the tax shall become chargeable but does not affect the
moment of the chargeable event. Consequently, the Commission is of the opinion that
no derogation from Article 22 (4) and (5) is needed.
Article 17 (1) provides that the right to deduct shall arise at the time the tax becomes
chargeable. The Commission considers the derogation from Article 17 (1), which
postpones the right of deduction of tax until it has been paid to the supplier, to be a
reasonable adjustment to the option provided for in Article 10 (2), which permits
payment of tax to be deferred until receipt of the price.
The Commission considers that the United Kingdom can be authorised to apply the
derogation for a period expiring on 31 December 1999. In fact, the Commission
adopted on 10 July 1996 a work programme based on a step-by-step approach for
progressing towards a new common system of VAT (COM (96) 328 final, 22 July
 1996). The last package of proposals to be put forward by mid-1999, the Commission
considers it appropriate to reconsider the necessity and the coherence of a specific
measure in the framework of the global approach of the new common VAT system.
                                          3
 ---pagebreak---                                           Proposal for a
                                    COUNCIL DECISION
     AUTHORISING 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
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty establishing the European 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 assessment1, and in particular Article 27
thereof,
Having regard to the proposal from the Commission,
Whereas, under the terms of Article 27(1) of Directive 77/388/EEC, the Council,
acting unanimously on a proposal from the Commission, may authorise any Member
State to introduce special measure 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 authorised, by Decision 93/111/EEC2, in
accordance with the procedure laid down in Article 27(1) to (4) of Directive
77/388/EEC, to apply a measure derogating from Article 17(1) of the said Directive
until 31 December 1996;
Whereas the United Kingdom, by means of a letter registered by the Commission on
 19 November 1996, requested authorisation to extend the said derogation;
Whereas the other Member States were informed on 18 December 1996 of the United
Kingdom's request;
Whereas this special measure derogating from Article 17(1) of Directive 77/388/EEC
forms part of an optional system of taxation for firms with an annual turnover of less
than £400.000 based on the third subparagraph of Article 10 (2) of the said Directive,
which permits payment of tax to be deferred until receipt of the price;
 1
   OJ No L 145, 13.6.1977, p. 1, as last amended by Directive 96/95/EC, OJ No L 338, 28.12.1996, p.
 89
 2
   OJ No L 43, 20.2.1993, p. 46
                                                  V
 ---pagebreak--- Whereas the United Kingdom wishes to increase the turnover ceiling from £350.000 to
£400.000 to take account of inflation;
Whereas a derogation can be accepted in view of the number offirmsthat already 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 accruingfromVAT,
Whereas the Commission adopted on 10 July 1996 a work programme based on a
step-by-step approach for progressing towards a new common system of VAT (COM
(96) 328final,22 July 1996);
Whereas the last package of proposals is to be put forward by mid-1999, the
authorisation is granted until 31 December 1999, in order to permit an evaluation of
the coherence of the derogation with the global approach of the new common VAT
system,
HAS ADOPTED THIS DECISION:
                                           5~
 ---pagebreak---                                        Article I
By way of derogation from the provisions of Article 17(1) of Directive 77/388/EEC,
the United Kingdom is hereby authorised, until 31 December 1999, to provide within
an optional scheme that enterprises with an annual turnover of less than £400.000 must
postpone therightof 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
                                          6
 ---pagebreak---                                                                    ISSN 0254-1475
                                                             COM(97) 64 final
                                             DOCUMENTS
 EN                                                              09 06 08      10
                                    Catalogue number : CB-CO-97-069-EN-C
                                                              ISBN 92-78-16263-9
Office for Official Publications of the European Communities
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