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European Commission - Press release

Taxation: Commission refers the United Kingdom to the Court for its failure to comply with VAT rules for certain commodity markets

Brussels, 24 January 2019

The Commission decided today to refer the United Kingdom to the Court of Justice of the EU for extending the scope of a VAT measure which allows VAT derogations for certain commodity markets.

Currently, the United Kingdom applies a zero-rate of VAT to transactions carried out on certain commodity markets in the UK. Since this derogation was notified to the Commission in 1977, the UK has extended the scope of the measure considerably, meaning that it is no longer limited to trading in the commodities originally covered.

Under EU rules agreed by all Member States (the VAT Directive, Council Directive 2006/112/EC), this type of "standstill" derogation cannot be extended in scope. It also generates major distortions of competition to the detriment of other financial markets within the EU.

Today's referral follows the United Kingdom's failure to bring its legislation into line with EU VAT law following the Commission's reasoned opinion in July 2018. The European Commission is enforcing EU legislation in its role of Guardian of the Treaties .

Background

Article 394 of the VAT Directive is a standstill provision thatprovides for a special arrangement derogating from the usual EU system for collecting VAT. That provision allows Member States that, on 1 January 1977, applied special measures to simplify the procedure for collecting VAT or to prevent certain forms of tax evasion or avoidance to retain them under certain conditions. One condition was that such measures had to be notified to the Commission before 1 January 1978.

Member States cannot enlarge the scope of measures notified under Article 394. The United Kingdom has made at least eight amendments to its derogation without notifying the amendments to the Commission.

For More Information

 

IP/19/470

Press contacts:

General public inquiries: Europe Direct by phone 00 800 67 89 10 11 or by email


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