Despite a reminder in July 2018, the United Kingdom has still not complied with EU rules on value added tax (VAT) (Directive 2006/112/EC). The European Commission took action on Thursday 24 January and has decided to refer the country to the EU Court of Justice over its VAT exemptions in certain commodity markets.
The VAT Directive provides for a derogation from the usual system for collecting VAT, allowing Member States which, at 1 January 1977, applied special measures to simplify the collection of VAT or to prevent certain types of tax fraud, to be able to continue to use them, provided that they notified the Commission before 1 January 1978.
Since 1977, the United Kingdom has benefited from this derogation, which allows it to impose a zero VAT rate on transactions carried out on certain commodity markets within its territory.
Nevertheless, the Commission notes that the country has considerably extended the scope of the measure, so that it is no longer limited to trade in the commodities initially covered.
“The United Kingdom has made at least eight amendments to its derogation without notifying the amendments to the Commission”, the European institution noted critically, and that this situation generates “major distortions of competition to the detriment of other financial markets within the EU”. (Original version in French by Marion Fontana)