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East Midlands Chamber News

UK Government criticised over EU VAT scheme

The scheme, which has been running in nine European Union (EU) member states since 2000, allows countries to let businesses in two of the following sectors charge lower rates of VAT:

  • Repair of bicycles, shoes, leather goods, clothing and household linen.
  • Renovation and repair of private dwellings.
  • Window cleaning and cleaning of private households.
  • Domestic care services.
  • Hairdressing.

It aims to stop people in these sectors working cash-in-hand without declaring their earnings to the taxman.The trial ends in December 2005, but some EU finance ministers wish to extend it. The UK Government is not among them - even though it approved a pilot scheme on the Isle of Man.UEAPME, the European pressure group for small- and medium-sized firms, has said the delay in deciding whether to extend the trial could damage those firms already taking part."A decision needs to be taken on the VAT scheme without delay or the involved sectors will be plunged into chaos. Ending the reduced rates is not an option that should be considered. This will play into the hands of the shadow economy and have a negative impact on employment," said Hans-Werner Miller, secretary general of UEAPME.UK trial hailed a successUnder the UK trial, tradespeople involved in renovating private dwellings have been able to reduce VAT on this work from 17.5 to five per cent.Andrew Corcoran, deputy collector of the Isle of Man Customs & Excise service, said: "We feel it has had an effect on the black market, encouraged people to register for VAT, improved employment and the number of apprenticeships offered, and encouraged people to renovate old houses instead of concentrating on new ones."However, a Treasury spokesman said the UK Government was still unconvinced that the scheme offered the most effective ways of boosting employment and tackling the black market.

  • To find out more about registering for VAT visit www.hmrc.gov.uk

(c) Business Hotline Publications Ltd 2005

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