Value Added Tax (Tour Operators) (amendment) (EU exit) Regulations 2019

Barry Sheerman Excerpts

Thursday 9th May 2019 General Committees

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

I am sorry I was late, Sir Henry. It is Europe day, and I was asking a question in business questions about celebrating our membership of the European Union. Does my hon. Friend agree that working people in the travel and tourism industry in our country, which is very important, are extremely worried about their jobs and their future? This statutory instrument is very important indeed to their lives.

[Anneliese Dodds]

I could not agree more. That is absolutely the case. To an extent, I have an interest in this sector, as some of my family members have been involved in it. It is often a route for social mobility, because small, innovative firms can develop a specific offer and, as a result, grow, innovate and create new jobs. It is a dynamic part of the UK economy. We need more information—I hope that the Minister can provide some—about how the Government will try to protect and nurture those firms, given the potential impact of the additional administrative and perhaps financial burden if these measures are required.

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[Mel Stride]

I am grateful to the hon. Member for Oxford East for her usual thorough interrogation of the issues at hand.

[Mr Sheerman]

Yes, she’s good, she is.

[Mel Stride]

The hon. Lady’s colleague says she is very good, and I concur entirely with that sentiment.

I am pleased that the hon. Lady agrees with the premise of what we are attempting to achieve here. She recognised the importance of avoiding potential changes in the unlikely event of a no-deal Brexit, in terms of double taxation. She specifically raised the issue of what would happen, and she set out in great detail what might happen, in the event that we were to leave the European Union and the EU were to then change its relationship in respect of this particular element of the VAT regime and what the impact of that might be on the UK business sector. I would like to make a few brief points on that.

The first point to make is that there is no suggestion at this stage from HMRC or ourselves that that is a likely outcome, in terms of the discussions that we have had with the European Union on our exit. It would introduce a great additional complication on both sides were the EU27 to decide to move in that direction.

The second point I would raise is one that the hon. Lady raised. Under the EU’s current regime, no third countries are treated as having to register for VAT within any of the EU28 member states with which they may be conducting business.

Thirdly, when we look at VAT, where holidays or trips are sold from the UK into the EU27, VAT is generated as a consequence of those trips and the hotel bookings and so on, so the EU and member states are collecting VAT in that way. As the hon. Lady will recognise, the context of this debate is the margin on which the VAT is being accrued.

Finally, if we were to end up in a no-deal situation, which I think unlikely, and the EU were to decide that our businesses had to register separately within the EU27, it would have to think long and hard about the consequences and what we might do in response to that. I do not think it would be in either party’s interest to change from the current status quo.

The hon. Lady also pointed out that the impact assessment foresees limited or effectively no impact on businesses. Of course, that excludes the scenario on which she dwelt at great length in her speech, and rightly so, as I have set out why we think that is highly unlikely. She asked what support we would provide to business in the event that there was a changed response from the EU27. Were we to get into that kind of territory, we would know some time in advance, and would take decisions at that moment in time.

She also asked whether we had encouraged the EU to look at alternative arrangements. I am fairly confident in saying that we have not engaged in those specific discussions with the EU on the basis that we think that it is extremely unlikely, but were it to appear to become more likely, then of course we would look at all those particular avenues. She asked a specific question about what the loss of VAT revenue might be as a consequence of complying with WTO rules and applying the zero VAT rate to those transactions between ourselves and the EU27, in the unlikely event of a no-deal Brexit. I am very happy to write to her to give as accurate an answer as I can.

I thank the hon. Member for Linlithgow and East Falkirk (Martyn Day) for his comments. I think he said it was disgraceful that we are still planning for a no-deal Brexit, but that is something that we passionately do not want, which is why we are working so hard to try to deliver a deal. However, we must recognise the fact that ultimately a no-deal might be outside of our control. It is to some degree within the gift of the European Union. As a responsible Government, we must make sure we cover that remote possibility. On that basis, I hope the Committee will support the instrument.

Question put and agreed to.