Select Committee on European Scrutiny Seventh Report


COM(00) 650

Draft Directive amending Council Directive 77/388/EEC with a view to simplifying, modernising and harmonising the conditions laid down for invoicing in respect of Value Added Tax.

Legal base: Article 93 EC; consultation; unanimity
Document originated: 17 November 2000
Forwarded to the Council: 17 November 2000
Deposited in Parliament: 7 December 2000
Department: HM Customs & Excise
Basis of consideration: EM of 29 October and SEM of 14 November 2001
Previous Committee Report: HC 28-iii (2000-01), paragraph 8 (17 January 2001)
To be discussed in Council: No date known
Committee's assessment: Politically important
Committee's decision: Cleared


19.1  The current EC VAT invoicing rules are set out in Article 22 of the Sixth VAT Directive (77/388). They set out minimum requirements only and do not reflect recent technological developments and commercial practices, particularly the issuing of invoices by electronic means. The diversity across the Community and restrictions in some Member States may be affecting competitiveness and slowing the development of electronic commerce generally. A Commission study in 1999 concluded that Community legislation should include a harmonised list of statements to be included on every invoice and should explicitly authorise electronic invoicing.

The document

19.2  Based on the 1999 study, the Commission now proposes amendments to Article 22 of the Sixth Directive to update and standardise current VAT rules for paper invoices across all Member States and to introduce new common rules on electronic invoicing. The previous Committee considered, but left uncleared, the document in its Report of 17 January 2001, pending receipt of the Regulatory Impact Assessment (RIA) and details of the views expressed by business interests in the UK.

The Government's view

19.3  In her Supplementary Explanatory Memorandum of 14 November 2001, the Paymaster General (Dawn Primarolo) has provided the information the previous Committee requested.

19.4  As regards the consultations, the Minister says that:

    "Responses were received from the Confederation of British Industry, the VAT Practitioners Group, the VAT in Industry Group, the British Bankers Association, the Business Applications Software Development Association, and Deloitte & Touche. All generally supported the draft Directive and the aim of harmonising VAT invoicing rules across the EU. The VAT Practitioners Group, for example, said 'there are strong arguments for a greater degree of harmonisation of conditions governing VAT invoicing'. And the VAT in Industry Group, said 'Overall the members welcome.. ..the proposal to simplify, modernise and harmonise invoicing conditions" .

"Their main concerns with the Commission's proposals were as follows:

    — the obligation to issue an invoice for exempt supplies;

    —the requirement to issue an invoice for domestic zero-rated supplies;

    —the need for invoices to make reference to the Sixth VAT Directive provision, in order to justify an exemption;

    —the requirement for invoices to show the place of supply of goods or services;

    —the obligation for an electronic invoice to bear an advanced electronic signature to guarantee its authenticity and integrity;

    —the requirement that electronic invoices must be stored together with their advanced electronic signature;

    —the inability for both parties to agree to exclude VAT from credit and debit notes;

    —difficulty in interpreting 'smaller amounts' invoices for which [businesses] can omit some of the compulsory statements;

    —inflexible approach to simplification in areas other than invoices for 'smaller amounts'.

    "Many of these concerns have been resolved in subsequent Working Group negotiations. Later this month, as the final shape of this Directive becomes clearer, we will give our business contacts a further opportunity to comment on its contents."

19.5  As regards the RIA, the Minister says that:

    "There is likely to be a first year net regulatory cost to the trade of about £70m which will thereafter be offset and, in the long term, exceeded by year-on-year savings of £25m. Whilst there is a regulatory cost to the trade in the short term, this is in fact a simplification which will be generally welcomed by business. Further, the additional short-term costs of the change are likely to be significantly outweighed by the benefits in the long term."


19.6  Our predecessors considered the proposal to be an important administrative development affecting the whole of the business community. They noted that the Directive would replace what are at present minimum requirements only with new and harmonised procedures, and considered it important to ensure that the harmonised requirements put the least possible extra bureaucratic requirements on UK businesses, notwithstanding the compensating advantages that the proposal will generate.

19.7  The Minister has provided the information requested, and we clear the document.

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