Annex II
MECHANISMS FOR PAYMENT OF UK MONTHLY CONTRIBUTIONS
AND RECEIPTS
FINANCING OF
THE EC BUDGET
The system for financing the annual EC Budget
is set down in a document known as the Own Resources Decision
(ORD). The ORD lays down four sources of Community revenue (and
also includes provision for the UK abatement, and correction mechanisms
for Austria, Germany, the Netherlands and Sweden). The four sources
of revenue are:
— Customs duties, including those on
agricultural products;
— VAT-based contributions; and
— GNI-based contributions.
The first two are known as Traditional Own Resources
(TOR).
Payments are made to the EC Budget on a twice
monthly basis. VAT and GNI-based contributions are made on the
first working day of each month. This payment also encompasses
the UK abatement,which serves to reduce the size of these contributions
for the UK. TOR payments are made on the first working day after
the 19th of each month.
The total VAT-based and GNI-based contributions
for each year, and the level of the UK abatement, are as shown
in the Adopted EC Budget or any subsequent amending Budgets. Payments
each month are made in 12/ths or a proportion thereof. Because
of the high level of CAP payments which are made out of the EC
Budget in the first quarter of the year (January to March) Regulations
allow the European Commission to call up additional VAT-based
and GNI-based contributions, up to two additional 12/ths of each,
so that in the first quarter up to 5/12ths of each of these elements
may be paid. Whatever draw-forward is made for VAT also applies
to the UK abatement. After the first quarter payments will be
in 12/ths, or less, so that over the course of the year Member
States pay exactly the amount shown in the Adopted or Amending
Budgets.
TOR payments are made on the basis of what Member
States collect, less 25 per cent in respect of collection costs,
and they do not have to meet the estimate for TOR given in the
EC Budget. The TOR payment in one month relates to duties two
months previously, eg a payment made on 20 June would relate to
April duties.
UK contributions are made in sterling. VAT,
GNI and UK abatement payments are converted from the euro figures
shown in the Adopted EC Budget, or any amending Budgets, using
the exchange rate on the last working day of the preceding year,
eg these contributions in 2007 will be converted at the exchange
rate on 28 December 2006. TOR payments are collected and paid
in sterling.
BANK ACCOUNTS
UK payments are made into the European Commission
bank account held in the UK, known as the EC No 1 account. This
account is held with the Office of HM Paymaster General at the
Bank of England and is administered on behalf of the European
Commission by the Treasury. The Bank does not pay interest on
this account.
UK contributions are made direct from the Consolidated
Fund. These payments are made in accordance with section 2(3)
of the European Communities Act 1972, which provides the authority
for the UK to meet its obligations towards financing the EC Budget.
LATE PAYMENTS
The European Commission can claim interest from
any Member State which makes a late payment. For the UK the. interest
rate is the Bank of England Repo rate on the last working day
of the month prior to that on which the payment should have been
made; currently 5 per cent. Under the terms of the ORD Implementing
Rules, the European Commission will then add a further 2 per cent,
eg the rate of 5 per cent would increase to 7 per cent, plus an
additional 0.25 per cent for each full month by which the payment
is delayed. For example, if the payment is delayed by 12 months
the interest rate applied would be 10 per cent (5 per cent+2 per
cent+(0.25 per cent_12 ).
UK RECEIPTS
The vast majority of UK receipts from the EC
Budget pass through Government Departments even though the end
recipient might be in the private sector, eg CAP payments to farmers.
These payments are made from the EC No 1 account referred to above
to the Department concerned via a holding account known as the
HMT4 account which is also administered by the Treasury.
The process for making these payments works
on a five working day cycle, with the European Commission sending
a Communication to the Treasury on the second day of the cycle
in which the payment is due to be made to the Department concerned.
The Communication from the European Commission will give details
of the payments to be made. Payments are notified in euro and
then converted to sterling using the exchange rate on the date
two days prior to the date on which the payment is due to be made.
This rate is obtained from the Bank of England and notified to
the European Commission. The equivalent sterling figures are also
notified to the European Commission who then confirm their agreement
to this sterling amount being transferred from the EC No 1 Account.
These arrangements apply to UK CAP receipts
and Structural Funds receipts but some other receipts, eg Trans
European Networks receipts, are paid direct from the European
Commission to the Department concerned. Receipts paid direct to
the UK private sector, eg payments to UK universities for research
projects, are also made directly from Brussels to the end recipient.
24 January 2007
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