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EC infringement proceedings on VAT zero-rate and customs duty losses

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The European Commission has sent letters of formal notice to the UK, requesting a response within two months on two matters: VAT zero-rating for certain commodity derivatives under the UK’s Terminal Markets Order; and the UK’s refusal to pay over more than €2bn in customs duty lost through fraud.

The VAT (Terminal Markets) Order, SI 1973/173, allows a specific VAT zero rate for derivative transactions in spots, futures (and options on) commodity contracts, when traded on an exchange. HM Treasury said in a statement responding to the Commission’s notification that: ‘the letter does not have any immediate effect on UK tax law and the matter will be subject to the normal infraction process, which is open to challenge’.

The customs duty proceedings concern the UK’s failure to take action to prevent fraud relating to the importation of textiles and footwear originating in the People’s Republic of China since 2007. According to the European Commission, this is despite the UK ‘having been informed of the risks of fraud and having been asked to take appropriate risk control measures’. The Commission calculates that losses to the EU budget amount to € 2.7bn (minus collection costs) between November 2011 and December 2017.

Issue: 1391
Categories: News , Indirect taxes , VAT