European Scrutiny Committee Contents

18 Value added taxation



COM (10) 381

Draft Directive amending Directive 2008/9/EC laying down detailed rules for the refund of VAT, provided for in Directive 2006/112/EC, to taxable persons not established in the Member State of refund but established in another Member State

Legal baseArticle 113 TFEU; consultation; unanimity
Document originated15 July 2010
Deposited in Parliament22 July 2010
DepartmentHM Treasury
Basis of considerationEM of 27 July 2010
Previous Committee ReportNone
To be discussed in CouncilNot known
Committee's assessmentPolitically important
Committee's decisionNot cleared, further information requested


18.1 Under Council Directive 2008/9/EC, with effect from 1 January 2010, VAT registered taxpayers have until 30 September of the calendar year following the refund period to submit their VAT refund claims. This means, for example, that businesses have until 30 September 2010 to submit any VAT refund claims in respect of the 2009 calendar year. Under the previous paper-based EU VAT refund system, businesses only had a six-month period to submit their refund claims, so the new arrangements are relatively generous and business-friendly. However, although Member States tax authorities were meant to have their electronic VAT refund portals up and running from 1 January 2010, a small number did not do so until mid-May 2010.

18.2 Council Directive 2008/9/EC specifies in some detail the core common data fields that must be included on each Member State web-based portal. However, Member States have had divergent views about the detailed design of their own portals. Some businesses have contended that the different approaches adopted by tax administrations make it difficult for them to submit claims in several Member States.

The document

18.3 Given the delay in some Member States in setting up electronic VAT refund portals the Commission presents this draft Directive to ensure that EU businesses in all Member States can obtain their VAT refunds by allowing an exceptional six-month extension for the first year, that is from 30 September 2010 to 31 March 2011.

18.4 The Commission suggests also, in the draft Directive, that Member States harmonise some features of their national VAT refund web portals to make them more inter-operable and accessible for taxpayers. It proposes, subject to the opinion of the EU Standing Committee for Administrative Cooperation, it be granted the power to adopt and implement a more fully harmonized EU system.

The Government's view

18.5 The Exchequer Secretary to the Treasury (Mr David Gauke) says that although at first sight the draft Directive seems sensible and reasonable, the impact and consequences are not straightforward and the Government has concerns about both aspects of the proposal. He tells us first that:

  • any extension of the deadline for making claims will entail costly IT system changes for HMRC and VAT refund agents;
  • it will create operational problems for HMRC, as it has deployed additional resources to deal with the anticipated surge in refund claims ahead of the September 2010 deadline;
  • it will create confusion for EU businesses as it is very unlikely that any Member State would be able to change their IT systems to accept late claims before the current 30 September deadline expires;
  • although the Commission has provided some background information in its explanatory memorandum on the proposal there is no detailed analysis or supporting evidence; and
  • the Government has concerns that the proposed deadline extension has not been fully thought through and that it is a superficial knee-jerk response to lobbying by a small number of EU businesses.

The Minister adds that the proposed extension to the deadline would impose additional IT system change costs on HMRC of between £100,000 and £150,000 (and could not be implemented in time). It would also impose un-quantified costs on VAT refund agents.

18.6 As regards the Commission's proposal that it be granted additional powers to develop and implement a fully harmonised pan-EU VAT refund system, the Minister says that:

  • the Government questions whether this is either necessary or appropriate;
  • it has recently implemented a new web-based portal in accordance with core requirements agreed by the Commission and the adoption of new, revised requirements would require costly amendment of the UK's IT system; and
  • as the Commission's explanatory memorandum lacks detailed analysis or supporting evidence, it would be inappropriate to agree to what has been proposed.

18.7 Finally the Minister tells us that:

  • the proposal does not currently feature on any advance ECOFIN Council agenda, although it would need to be adopted before the end of September 2010, when the current deadline expires;
  • given that the first Council working group discussion on this proposal will not take place until 20 September 2010 the timetable is unrealistic; and
  • time would also need to be factored in for consultation with the European Parliament and the Economic and Social Committee.


18.8 We agree with the Minister that this proposal seems ill-considered and inappropriate. We note also the unrealistic timetable. However, before considering the matter further we should like to hear how Council consideration of the proposal develops. Meanwhile the document remains under scrutiny.

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Prepared 22 September 2010